Judge Gilstrap reached the above conclusion in a decision earlier this week in G+ Communications, LLC v. Samsung Electronics Co., Civil Action No. 2:22-CV-00078-JRG. The conclusion comes in response to a request by Samsung that the court “make the following determination of French law: French law does not allow a SEP declarant to unilaterally discharge (and thus avoid) its irrevocable FRAND obligations, including its duty to negotiate in good faith and its obligation to license declared patents on FRAND terms” (p.5). The court agrees that the commitment is irrevocable, as stated in Clause 6.1 of the ETSI IPR Policy, but that it can be suspended during the period of time, if any, that the opposite party fails to discharge its obligation to negotiate in good faith:
The Court is persuaded that the obligation to negotiate toward a FRAND license in good faith may be temporarily suspended. . . . First, G+ and Samsung are subject to reciprocal obligations of good faith during negotiations for a license to a FRAND-encumbered patent. The parties’ experts agree on this point. . . . Next, one party’s failure to fulfil its obligation to negotiate in good faith suspends the other’s. . . . Indeed, Samsung’s own expert, Professor Molfessis, testified that “[w]hen in presence of reciprocal obligations a party doesn’t perform its obligation, it’s possible for the other party to ask for the termination of the contract or to suspend its own obligation.” (Dkt. No. 552-1 at 49:3–7 (emphasis supplied).) . . .
SEP holders maintain an obligation to license its [sic] SEPs on FRAND terms and to negotiate toward such licenses in good faith. These obligations are irrevocable in the sense that SEP holders cannot withdraw them or take them back. However, their irrevocable nature does not mean they are static.
. . . It is both practical and logical that the obligations of a party acting in good faith be suspended when a counterparty to a negotiation for a FRAND license is acting in bad faith. If the counterparty is acting in bad faith, it is impossible for negotiations for a “fair” and “reasonable” and “non-discriminatory” contract to proceed. . . . To hold otherwise would strain logic and reason. However, when the counterparty ceases acting in bad faith, the barrier to consummation of the license on FRAND terms is removed and the negotiations can and must resume (in good faith). Further, holding that a party’s duty to negotiate in good faith is suspended while the counterparty is acting in bad faith prevents the party acting in good faith from being taken advantage of by the counterparty. Such a suspension can counter the effects of holding up and holding out. . . .
For the reasons and supporting sources noted herein, the Court makes the following determination of French law pursuant to FRCP 44.1:
Where a patent is contributed to an adopted standard established by a standard setting organization, such contribution contractually burdens the patent to thereafter be licensed on fair, reasonable, and non-discriminatory terms. This is known as the FRAND obligation. This obligation is irrevocable, and thereafter runs with the patent. However, if in negotiating for a license to a patent burdened by a FRAND obligation either the patent holder or the implementer of the adopted standard fails to act in good faith and thereby prevents a license from being granted, the other party’s obligation to continue negotiations is suspended. This does not remove the burden of the FRAND obligation from the patent, but avoids obliging a party acting in good faith to continue negotiating with a party who fails to do so. If the bad faith actor ceases its bad faith and begins acting in good faith, the good faith negotiations must also resume (pp. 6-11).
Hat tip to my former student Michael Sikora, for calling this decision to my attention.
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