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`IN THE UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF MICHIGAN
`SOUTHERN DIVISION
`
`Plaintiff,
`
`
`
`v.
`
`HEWLETT-PACKARD CO.,
`
`
`
`
`
`CHRIMAR SYSTEMS, INC. d/b/a
`CMS TECHNOLOGIES,
`
`
`
`
`
`Defendant.
`
`
`
`
`Case No.
`
`HON.
`
`DEMAND FOR JURY TRIAL
`
`
`
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
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`
`
`HEWLETT-PACKARD CO.’S COMPLAINT
`AND DEMAND FOR JURY TRIAL
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`Plaintiff Hewlett-Packard Company (“HP”), for its Complaint against
`
`Defendant ChriMar Systems, Inc. d/b/a CMS Technologies (“ChriMar”), hereby
`
`demands a jury trial and alleges as follows:
`
`NATURE OF THE ACTION
`
`1.
`
`HP seeks a declaratory
`
`judgment of patent noninfringement,
`
`invalidity, and unenforceability due to unclean hands, estoppel, waiver, and/or
`
`implied license of United States Patent Nos. 8,902,760 (the “‘760 Patent”), entitled
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`“Network System and Optional Tethers,” and 8,942,107 (the “‘107 Patent”),
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`entitled “A Piece of Ethernet Terminal Equipment,” pursuant to the Patent Laws of
`
`the United States, 35 U.S.C. § 100 et seq., and such other relief as the Court deems
`
`just and proper.
`{36692/1/DT932199.DOC;1}
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`
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`CHRIMAR 2001
`IPR2018-00033
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`
`
`IN THE UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF MICHIGAN
`SOUTHERN DIVISION
`
`Plaintiff,
`
`
`
`v.
`
`HEWLETT-PACKARD CO.,
`
`
`
`
`
`CHRIMAR SYSTEMS, INC. d/b/a
`CMS TECHNOLOGIES,
`
`
`
`
`
`Defendant.
`
`
`
`
`Case No.
`
`HON.
`
`DEMAND FOR JURY TRIAL
`
`
`
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`
`
`
`
`
`HEWLETT-PACKARD CO.’S COMPLAINT
`AND DEMAND FOR JURY TRIAL
`
`Plaintiff Hewlett-Packard Company (“HP”), for its Complaint against
`
`Defendant ChriMar Systems, Inc. d/b/a CMS Technologies (“ChriMar”), hereby
`
`demands a jury trial and alleges as follows:
`
`NATURE OF THE ACTION
`
`1.
`
`HP seeks a declaratory
`
`judgment of patent noninfringement,
`
`invalidity, and unenforceability due to unclean hands, estoppel, waiver, and/or
`
`implied license of United States Patent Nos. 8,902,760 (the “‘760 Patent”), entitled
`
`“Network System and Optional Tethers,” and 8,942,107 (the “‘107 Patent”),
`
`entitled “A Piece of Ethernet Terminal Equipment,” pursuant to the Patent Laws of
`
`the United States, 35 U.S.C. § 100 et seq., and such other relief as the Court deems
`
`just and proper.
`{36692/1/DT932199.DOC;1}
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`CHRIMAR 2001
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`
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`2.
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`A true and correct copy of the ‘760 Patent is attached hereto as
`
`Exhibit A. A true and correct copy of the ‘107 Patent is attached hereto as Exhibit
`
`B.
`
`3.
`
`HP also brings an action for breach of contract by ChriMar for breach
`
`of the IEEE’s patent policy and bylaws that required ChriMar to disclose through a
`
`Letter of Assurance patents or patent applications that ChriMar believed were
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`infringed by the practice of actual and/or proposed standards of the IEEE, such as
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`ChriMar’s ‘760 and ‘107 Patent-related applications.
`
`4.
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`HP also brings an action under Section 17200 et seq. of the California
`
`Business and Professions Code for ChriMar’s unfair business practices related to
`
`its conduct before the IEEE and its enforcement of the ‘760 Patent, the ‘107 Patent,
`
`and related patents.
`
`PARTIES
`
`5.
`
`Plaintiff Hewlett-Packard Co. is a corporation organized under the
`
`laws of Delaware with its principal place of business at 3000 Hanover Street, Palo
`
`Alto, California.
`
`6.
`
`On information and belief, Defendant ChriMar Systems, Inc. d/b/a
`
`CMS Technologies is a Michigan corporation with its principal place of business at
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`36528 Grand River Avenue, Suite A-1 in Farmington Hills, Michigan.
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`{36692/1/DT932199.DOC;1}
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`JURISDICTION AND VENUE
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`7.
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`This Court has jurisdiction over these claims pursuant to, and without
`
`limitation, 28 U.S.C. §§ 1331, 1338(a), and 1367; the Declaratory Judgment Act
`
`28 U.S.C. §§ 2201 and 2202; and the patent Laws of the United States, 35 U.S.C. §
`
`1 et seq.
`
`8.
`
`The Court also has supplemental jurisdiction over the state law claims
`
`asserted in this Complaint under 28 U.S.C. § 1367 because the state and federal
`
`claims arise from a common nucleus of operative facts.
`
`9.
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`An actual and justiciable controversy exists between ChriMar and HP
`
`as to the noninfringement, invalidity, and unenforceability of the ‘760 and ‘107
`
`Patents. 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
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`Power over Ethernet (“PoE”) networking products, including HP. In connection
`
`with ChriMar’s licensing campaign targeting PoE products, HP is currently
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`involved in litigation against ChriMar with respect to U.S. Patent No. 7,457,250
`
`(the “‘250 Patent”).1 This litigation involves PoE products implementing the IEEE
`
`802.3af and IEEE 802.3at amendments to the IEEE 802.3 standard. HP has also
`
`brought a declaratory judgment action against ChriMar with respect to related U.S.
`
`
`1
`ChriMar Systems, Inc. v. Cisco Systems, Inc., No. 4:13-cv-1300-JSW (N.D.
`Cal.) (“ChriMar v. Cisco”).
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`{36692/1/DT932199.DOC;1}
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`
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`Patent No. 8,155,012 (the “‘012 Patent”) in this Court.2 The ‘760 Patent issued in
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`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
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`January 2015. HP maintains that the ‘250, ‘012, ‘760, and ‘107 Patents are invalid,
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`unenforceable, and are not infringed by HP’s PoE products capable of
`
`implementing the IEEE 802.3af and IEEE 802.3at amendments to the IEEE 802.3
`
`standard.3
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`10. 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
`
`and ‘107 Patents, has a substantial relationship to Michigan. ChriMar has availed
`
`itself of the laws of this district in connection with its current portfolio licensing
`
`
`2
`Hewlett-Packard Co. v. ChriMar Systems, Inc., No. 2:14-cv-10292 (E.D.
`Mich.). That action is currently stayed pending resolution of the N.D. Cal.
`litigation.
`3
`In ChriMar v. Cisco, HP 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 HP’s PoE products, including products
`implementing the IEEE 802.3af and 802.3at standards.
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`efforts targeting PoE products, including by litigating patent infringement claims
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`involving that portfolio in this district.
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`11. 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.
`
`A. CHRIMAR’S PATENTS
`
`BACKGROUND
`
`12. 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”).
`
`13. The ‘107 Patent, entitled “Piece of Ethernet Terminal Equipment,”
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`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.
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`14. As alleged herein, the ‘107 Patent was not duly and legally issued.
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`15. On information and belief, ChriMar is the current assignee of the ‘107
`
`Patent.
`
`16. 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, now the ‘107 Patent,
`
`which 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 ‘760 Patent are John F. Austermann, III and
`
`Marshall B. Cummings.
`
`17. As alleged herein, the ‘760 patent was not duly and legally issued.
`
`18. On information and belief, ChriMar is the current assignee of the ‘760
`
`patent.
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`19. 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
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`reports that it is a continuation of Application No. 10/668,708, filed on September
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`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.
`
`20. On information and belief, ChriMar is the current assignee of the ‘012
`
`Patent.
`
`21. A true and correct copy of the ‘012 patent is attached hereto as
`
`Exhibit C.
`
`22. The ‘250 patent, entitled “System for Communicating with Electronic
`
`Equipment,” reports that it was filed on September 23, 2003, issued on November
`
`25, 2008 and then had a reexamination certificate issued on March 1, 2011. The
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`‘250 patent reports that it is a continuation of Application No. 09/370,430, filed on
`
`August 9, 1999, now U.S. patent No. 6,650,622, 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.
`
`23. On information and belief, ChriMar is the current assignee of the ‘250
`
`patent.
`
`24. A true and correct copy of the ‘250 patent is attached hereto as
`
`Exhibit D.
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`25. As alleged herein, on information and belief, HP believes that
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`ChriMar asserts, and will assert, that the ‘760 and ‘107 Patents cover products with
`
`Power over Ethernet (“PoE”) functionality.
`
`B. CHRIMAR’S LICENSING AND ENFORCEMENT EFFORTS
`TARGETING PRODUCTS WITH POWER OVER ETHERNET
`FUNCTIONALITY
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`26. For many years, ChriMar has actively pursued a patent licensing and
`
`enforcement campaign using its patent portfolio to target products with PoE
`
`functionality specified by certain standards promulgated by the Institute of
`
`Electrical and Electronics Engineers (“IEEE”) and sellers of such products,
`
`including numerous California-based companies.
`
`27. ChriMar’s licensing and enforcement campaign began in 2001 when it
`
`sued manufacturers of products with PoE functionality in this district for allegedly
`
`infringing the ‘260 patent. ChriMar initially sued Cisco Systems, Inc., for alleged
`
`infringement of the ‘260 patent in 2001, accusing, for example, Cisco’s IP phones.4
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`ChriMar thereafter claimed that the ‘260 patent was “essential” to the IEEE PoE
`
`standards.5 ChriMar also sued D-Link Systems (“D-Link”)6 and Foundry
`
`
`4 ChriMar Sys., Inc. v. Cisco Sys., Inc., No. 2:01-cv-71113 (E.D. Mich.) (filed Mar.
`21, 2001, terminated Sept. 15, 2005).
`5See
`at
`available
`Assurance,
`of
`Letter
`ChriMar
`http://standards.ieee.org/about/sasb/patcom/loa-802_3af-chrimar-03Dec2001.pdf.
`6 ChriMar Sys., Inc. v. D-Link Sys., Inc., No. 2:06-cv-13937 (E.D. Mich.) (filed
`Sept. 6, 2006, terminated Apr. 21, 2010).
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`Networks (“Foundry”),7
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`two other California-based companies, and also
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`PowerDsine, Ltd. (“PowerDsine”),8 based on their respective sales of products
`
`with PoE functionality accusing those companies of infringing the ‘260 patent
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`based on sales of those products. D-Link and PowerDsine took licenses to the ‘260
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`patent after favorable rulings were issued, and ultimately an additional claim of the
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`‘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.
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`28. Shortly after issuance of the ‘250 patent, which ChriMar deliberately
`
`failed to disclose to the IEEE standards bodies that developed the PoE standards,
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`ChriMar continued its licensing and enforcement campaign against sellers of
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`products with PoE functionality, including HP and a number of other California-
`
`based companies. ChriMar sued Waters Network Systems, LLC for allegedly
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`infringing the ‘250 patent in 2008, and went on to sue multiple additional sellers of
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`products with PoE functionality (including California-based companies Danpex
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`Corp., Garrettcom, Inc., and Edgewater Networks) in 2009.9 Following
`
`
`7ChriMar 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).
`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
`(continued…)
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`conclusion of a reexamination proceeding involving the ‘250 patent, ChriMar sued
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`HP, and also California-based Cisco Systems, Inc., Avaya, Inc., and Extreme
`
`Networks, both in the International Trade Commission,10 and in district court,11 for
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`allegedly infringing the ‘250 patent by selling products with PoE functionality,
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`including among other products, IP telephones, wireless access points, and wireless
`
`network cameras.
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`29. ChriMar expanded its licensing and enforcement campaign against
`
`products with PoE functionality to include the ‘012 patent. ChriMar filed five
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`actions in the United States District Court for the Eastern District of Texas alleging
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`infringement of the ‘012 patent by various manufacturers and re-sellers of products
`
`with PoE functionality, including IP telephones, wireless access points, and
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`wireless network cameras.
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`30. 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,
`
`
`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 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).
`11 ChriMar Systems, Inc. v. Cisco Systems, Inc., No. 1:11-cv-01050 (D. Del.),
`subsequently transferred as No. 3:13-cv-1300-JSW (N.D. Cal.).
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`2013, alleging infringement of the ‘012 patent, for among other things, making,
`
`using, offering for sale, selling, and/or importing IP telephones, which, on
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`information and belief, include PoE functionality.
`
`31. 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
`
`importing wireless access points, which, on information and belief, include PoE
`
`functionality.
`
`32. ChriMar brought suit against AMX, LLC, in the Eastern District of
`
`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.
`
`33. 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,
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`which, on information and belief, include PoE functionality.
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`34. ChriMar brought suit against Samsung Electronics Co, Ltd., Samsung
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`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.
`
`35. ChriMar’s website, www.cmspatents.com, 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, ‘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 page
`
`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
`
`
`12
`EthernetConnect
`(emphasis added).
`
`Program,
`
`http://www.cmspatents.com/index.html
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`approximately a month ago, is part of this same patent family that ChriMar
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`publicly states covers products supporting PoE functionality and which includes
`
`multiple patents that ChriMar is actively enforcing against manufacturers of such
`
`products, including HP. 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
`
`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
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`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
`
`
`13
`www.cmspatents.com/licensees.html.
`14
`EthernetConnect Program, http://www.cmspatents.com/index.html.
`15
`www.cmstech.com/power.htm.
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`{36692/1/DT932199.DOC;1}
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`with PoE functionality for allegedly infringing ChriMar’s patents, including the
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`‘760 and ‘107 Patents, as well as the ‘012 and ‘250 Patents.
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`C. CHRIMAR’S PATENT PORTFOLIO AND THE POWER OVER
`ETHERNET STANDARDS
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`1. STANDARDS IN GENERAL
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`36. A technical standard is an established set of specifications or
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`requirements that either provides or is intended to provide for interoperability
`
`among products manufactured by different entities. Once a standard is established,
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`competing manufacturers can offer their own products and services that are
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`compliant with the standard.
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`37.
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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
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`Power over Ethernet-enabled products, allow U.S. enterprises to create data and
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`voice communications networks knowing that the different elements of the
`
`network will work together. Standards help drive innovation by making new
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`products available and ensuring interoperability of components.
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`38. Technical standards serve an
`
`important
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`role
`
`in developing
`
`technologies and have the potential to encourage innovation and promote
`
`competition. As the technical specifications for most standards are published and
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`broadly available, entities interested in designing, manufacturing and producing
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`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.
`
`39. One goal of a typical standards-setting body is to create a standard
`
`that everyone in the industry can practice without the threat of patent infringement
`
`lawsuits that would prevent a company from practicing the standard. In
`
`furtherance of this goal, most standards-setting organizations have adopted
`
`intellectual property rights policies to address the problems that may arise from
`
`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. If,
`
`however, an issued standard requires the use of that patented technology, other
`
`technological approaches are generally no longer available as 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 that have designed, had made and sold standards-compliant
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`{36692/1/DT932199.DOC;1}
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`
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`products, such as HP, 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 is typically
`
`prohibitively expensive. Such high switching costs result in “lock-in” where
`
`companies become locked into manufacturing and selling 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 standards-compliant product.
`
`40. To address these concerns, standards-setting organizations typically
`
`have 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 standard setting organization who hold
`
`purported Essential Patent Rights commit to licensing those rights on RAND
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`{36692/1/DT932199.DOC;1}
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`
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`terms, or at minimum indicate that they will not provide such licenses to any
`
`Essential Patent Rights.
`
`41. The timely disclosure of any arguably Essential Patent Rights and
`
`whether the holder of those rights will license them on RAND terms by individuals
`
`participating in the standards-setting organization 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.
`
`42. Any non-disclosure of arguably Essential Patent Rights and/or breach
`
`of RAND commitments, as ChriMar has done here, undermine the safeguards that
`
`standard setting organizations put in place to guard against abuse and to prevent
`
`patent hold-up. By seeking to unfairly exploit intellectual property rights to
`
`technology by permitting a standard to be issued with non-disclosure of arguably
`
`Essential Patent Rights and/or breach of RAND commitments, the intellectual
`
`property owner violates the industry practice and the very commitment that led to
`
`incorporation of that technology in the first place.
`
`43. Failure to disclose Essential Patent Rights, as ChriMar has done here,
`
`also may lead to anti-competitive patent hold-up, where after the industry and the
`
`public have become locked into the standard, the patentee seeks to extract
`
`exorbitant, unreasonable or otherwise improper royalties through its improperly
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`{36692/1/DT932199.DOC;1}
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`2:15-cv-10814-AC-RSW Doc # 1 Filed 03/05/15 Pg 18 of 68 Pg ID 18
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`
`
`obtained power over the market for the technology used in standards-compliant
`
`equipment.
`
`2.
`
`THE HISTORY OF THE IEEE’S POWER OVER ETHERNET
`STANDARDS
`
`44. The IEEE is a standards setting organization 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.
`
`45.
`
`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
`
`draft standard to present to the IEEE 802.3 working group. As part of this process,
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`2:15-cv-10814-AC-RSW Doc # 1 Filed 03/05/15 Pg 19 of 68 Pg ID 19
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`
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`the task force held a number of meetings and received input from multiple industry
`
`participants.
`
`46. 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 a
`
`standard 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.
`
`47. 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 believe may be infringed by any proposed standard and whether the
`
`participant is willing or unwilling to grant licenses on RAND terms. As such, the
`
`IEEE has a “patent disclosure policy” that requires participants in the standards-
`
`setting process to disclose patents or patent applications they believe to be
`
`infringed by the practice of the proposed standard. This policy is set forth in the
`
`IEEE-SA Standards Board Bylaws and the IEEE-SA Standards Board Operations
`
`Manual. Further, the IEEE’s patent disclosure policy requires members and
`
`participants to disclose intellectual property rights through a “Letter of Assurance.”
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`{36692/1/DT932199.DOC;1}
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`2:15-cv-10814-AC-RSW Doc # 1 Filed 03/05/15 Pg 20 of 68 Pg ID 20
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`
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`See, e.g., IEEE, IEEE-SA Standards Board Operations Manual 22 (1998) (“patent
`
`holders shall submit letters of assurance to the IEEE Standards Department (to the
`
`attention of the Staff Administrator, Intellectual Property Rights) before the time of
`
`IEEE-SA Standards Board review for approval.”); see also IEEE, IEEE-SA
`
`Standards Board Bylaws 12 (1998). The IEEE’s patent disclosure policy also
`
`requires those submitting a Letter of Assurance to affirmatively elect whether or
`
`not it would “enforce any of its present or future patent(s) whose use would be
`
`required to implement the proposed IEEE standard against any person or entity
`
`using the patent(s) to comply with the standard,” or provide a license “to all
`
`applicants without compensation or under reasonable rates, with reasonable terms
`
`and conditions that are demonstrably free of any unfair discrimination.” IEEE,
`
`IEEE-SA Standards Board Bylaws 12 (1998).
`
`48. The IEEE 802.3af amendment was set on or around June 18, 2003,
`
`and the IEEE 802.3at amendment was set on or around September 11, 2009.
`
`49. Power over Ethernet devices that are compliant with the IEEE 802.3af
`
`and/or IEEE 802.3at amendments to the IEEE 802.3 standard include network
`
`switches that supply data and Power over Ethernet to devices such as VoIP phones,
`
`switches, WAPs, routers, and security cameras (previously referred to as “Power
`
`over Ethernet-enabled products.”). This allows buildings and other physical
`
`infrastructure to be designed so that electrical plugs do not need to be located near
`
`{36692/1/DT932199.DOC;1}
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`CHRIMAR 2001
`IPR2018-00033
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`
`
`2:15-cv-10814-AC-RSW Doc # 1 Filed 03/05/15
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