Samsung to Face Apple’s Patent Claims,|Both the New and the Old

SAN JOSE, Calif. (CN) - Apple can proceed to trial with most of the claims it made in reply to Samsung's own patent infringement lawsuit, in addition to the iPhone maker's original claims that Samsung stole its designs, a federal judge ruled.

U.S. District Judge Lucy Koh picked through five of Apple's 32 counterclaims in reply to Samsung's lawsuit. She dismissed one, knocked down the legal theory Apple used in another, and allowed the rest to stand.

The legal showdown started in April 2011 when Apple filed suit, accusing Samsung of selling knockoff smartphones and tablet computers that "slavishly copy" iPhone and iPad products.

Samsung wanted Judge Koh to dismiss Apple's counterclaims that Samsung manipulated the organization that set the Universal Mobile Telecommunications Standard both companies use in manufacturing their products, and in the process violated antitrust, unfair competition and contract laws.

Specifically, Apple saidSamsung induced the European Telecommunications Standards Institute (ETSI) to adopt Samsung patents for chipsets and other inventions as "declared-essential patents," but then refused to license those patents on fair, reasonable, and non-discriminatory terms, also called FRAND terms.

Most prominent in this week's ruling, Judge Koh refused to dismiss Apple's breach of contract and declaratory relief claims, but in the process held that Apple could not infer that it had a license with Samsung on the basis of Samsung's FRAND commitments to ETSI.

J. Koh combined her analysis of Apple's contract and declaratory relief counts because of what she described as overlapping questions. Also, her order says she chose to apply French law, against Samsung's wishes, because the ETSI intellectual property policy upon which Apple based its contract claims specifies that French law controls member disputes, and because Samsung was given adequate notice of Apple's intent to use French law.

Apple's breach of contract claim was given the green light in the order: "Samsung arguably consented to enter into FRAND licenses by submitting its FRAND declaration in order to have its patents adopted by the standard setting organization. Samsung certainly had the right to refuse to license its patents, but arguably relinquished that right when it submitted its FRAND declaration. At least at this stage, the Court is not willing to say that Apple's theory fails under French law."

Allegations that Samsung countersued Apple in bad faith retaliation, refused to quote licensing terms and refused to grant FRAND licenses when Apple asserted its own non-standards essential patents against Samsung "are sufficient to allow Apple to pursue the claim that Samsung did not negotiate FRAND terms in good faith" Koh says.

Apple also sufficiently pleaded that "Samsung breached its agreement with ETSI to timely disclose its [intellectual property rights] to the standard setting organization."

Apple said that based on its assertion that it is presently licensed to Samsung's declared essential patents, Samsung's decision to pursue this litigation is a breach of the license.

While Judge Koh refused to dismiss Apple's contract and declaratory relief claims, she found the Apple's licensing assertion "implausible, and Apple may not proceed under this theory."

"There is no existing license between Apple and Samsung because there was no firm offer and acceptance of the terms of the license that Apple claims already exists."

The federal antitrust claim Apple made can go to trial, the court says, because Apple identified the relevant technology markets where Samsung sells its declared-essential patents and because Apple sufficiently asserted that Samsung has the market power to raise prices and exclude competition.

The order says Apple also met the last required element of a Sherman Act antitrust claim as Apple "has been locked-in to the technology standard adopted by ETSI, which has conferred upon Samsung market power."

Samsung wanted the Apple's California state law unfair competition count tossed, but Judge Koh says Apple satisfactorily described "Samsung's allegedly extortionist conduct in attempting to file a patent infringement suit, despite the fact that Apple either owns a license or has a right to license [Samsung's declared-essential patents] on FRAND terms."

Judge Koh did throw Samsung a bone when she dismissed one count for promissory estoppel in which Apple said Samsung had induced Apple's reliance on Samsung with efforts to have standards setting organizations adopt Samsung's patents.

However, because French law was specified in the ETSI agreement through which Samsung promised to license declared-essential patents, Judge Koh dismissed Apple's promissory estoppel claim because "French law does not recognize a substantive claim for promissory estoppel."

Jury selection is scheduled for late July, while both sides will sit down Monday in San Francisco for court-ordered settlement talks.

Samsung is represented by Charles Verhoeven, Kevin Johnson and Victoria Maroulis of Quinn Emanuel Urquhart & Sullivan.

Morrison Foerster attorneys Harold McElhinny, Michael Jacobs and Jennifer Taylor represent Apple.

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