Chinese Phone Co. Can’t Cite Ericsson Arbitration Loss
By Bill Wichert
Law360, New York (May 27, 2016, 8:37 PM ET) -- A California federal judge refused Thursday to find that Ericsson Inc. charged a Chinese mobile phone developer an excessive rate for standard-essential patents for wireless technology, saying it would be unfair to apply an arbitration decision issued in a licensing dispute between Ericsson and another company.
U.S. District Judge James V. Selna denied TCL Communication Technology Holdings Ltd.’s motion for partial summary judgment in its lawsuit against Ericsson, saying the jury will play a different role from the arbitration panel and confront a wider range of issues. The judge said the doctrine holding that a decided issue cannot be relitigated is "simply not a good fit in this situation."
“The issues that will be submitted to the jury in this case are far-ranging," the judge said. "And while one of those issues overlaps with one of the issues decided by the arbitration panel, the differences between the proceedings, and sound policy considerations, suggest the Court should not exercise its discretion in applying collateral estoppel.”
TCL, which sells its products in the U.S. under the Alcatel OneTouch brand, alleges Ericsson has refused to license its standard-essential patents related to the global 2G, 3G and 4G telecommunications standards to TCL under fair, reasonable and nondiscriminatory terms.
TCL's motion centered on an arbitration ruling in a dispute between Ericsson and Huawei Technologies Co. Ltd. In that ruling, the panel found that Ericsson offered certain discriminatory royalty rates to Huawei for its patents. The arbitrators also made determinations about what it considered the effective royalty rate paid by some other cellphone manufacturers, according to Judge Selna’s decision.
Based on that ruling, TCL sought a summary judgment that Ericsson breached its obligations by offering TCL only a discriminatory effective royalty rate. The company argued its motion “will greatly clarify and simplify the jury’s task” and avoid relitigating an issue that has already been decided, according to a brief filed by TCL.
But Judge Selna said it was not appropriate to substitute the arbitration ruling for “one part of the holistic determination which the jury must make.” The judge said the lawsuit involves issues that were not addressed in the arbitration and he noted the differences between the two proceedings.
“One area where there is a continuing difference between the present case and the earlier arbitration is the issue of which other of Ericsson’s licensees are 'similarly situated' to TCL,” the judge said.
Looking beyond the litigation at hand, the judge also expressed concern that applying the arbitration ruling to the lawsuit would discourage parties from engaging in arbitration to resolve such patent licensing disputes.
“Disputes that could be resolved through negotiation and limited arbitration may expand into expensive, multiyear litigation if the licensor is disincentivized to arbitrate or if the licensor fears that findings made in the arbitration will conclusively and adversely impact its position in other litigation or other licensing disputes,” Judge Selna said.
Ericsson spokeswoman Kathy Egan Wummer said in a statement Friday, “Ericsson is pleased with the court’s recognition that the results of a private dispute resolution process that did not adjudicate any claims and was only intended to complete a license negotiation should not decide TCL’s claims in this litigation.”
Counsel for TCL did not respond Friday to messages seeking comment.
TCL is represented by Stephen S. Korniczky, Martin R. Bader and Matthew W. Holder of Sheppard Mullin Richter & Hampton LLP.
Ericsson is represented by John S. Gibson, Samrah Mahmoud, Robert B. McNary and Mark A. Klapow of Crowell & Moring LLP and Theodore Stevenson III and Laurie L. Fitzgerald of McKool Smith PC.
The case is TCL Communication Technology Holdings Ltd. v. Telefonaktiebolaget LM Ericsson et al., case number 8:14-cv-00341, in the U.S. District Court for the Central District of California.
--Editing by Richard McVay and Jill Coffey.
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