Fifth Circuit U-Turns But Still Finds Auto Supplier Cannot Force SEP Holder To Issue License | McDermott Will & Emery

In response to a request for a rehearing, the United States Court of Appeals for the Fifth Circuit reversed its earlier ruling finding that an auto parts supplier lacked constitutional standing to bring an antitrust lawsuit against Standard Essential Patent (SEP) owners. The Court issued a new opinion summarily upholding the district court’s original decision finding constitutionality, but dismissed the case for lack of antitrust statutes. Continental Automotive Systems, Inc. v. Avanci, LLC et al.Case No. 20-11032 (5th Cir. June 21, 2022) (Stewart, Ho, Engelhardt, JJ.) (by curie).

Continental has sued several SEP holders and their licensing agent, Avanci, for violations of Sections 1 and 2 of the Sherman Antitrust Act based on Avanci’s refusal to license the SEPs on terms that are fair, reasonable and not discriminatory (FRAND). Avanci requested the dismissal, arguing that Continental had neither constitutional status nor antitrust status. The district court ruled that Continental had constitutional status because its failure to obtain licenses on FRAND terms was an injury. However, the district court found that Continental lacked antitrust status and therefore dismissed the lawsuit. Continental appealed.

The Fifth Circuit issued its initial opinion in March 2022, finding that Continental’s theory of harm was insufficient to confer constitutional status. The Court explained that Avanci’s refusal to sell licenses did not result in recognizable harm to Continental and that Continental had no right to enforce FRAND contracts between individual patent holders and the standards body (SSO) since Continental was not part of the SSO. to which the SEP holders belonged. The Court also found that even though Continental was contractually entitled to a license on FRAND terms, the SSO contract was not breached because individual patentees fulfilled their obligations to SSO by actively licensing Continental’s customer. , which meant that the SEP licenses were (derivative) available to Continental on FRAND terms. Finding that Continental lacked constitutional status, the Court did not address the issue of whether Continental lacked antitrust status.

Continental filed a motion for a rehearing and a rehearing bench. Numerous third parties, including legal and economic scholars, industry associations and technology companies, have also filed friends briefs supporting Continental, arguing that the Fifth Circuit erroneously concluded that Continental was not an intended beneficiary of the FRAND obligations that SEP owners made to the affected SSO.

On June 14, 2022, the Fifth Circuit issued an order withdrawing its March 2022 opinion. A week later, the Court issued a new opinion summarily stating that “[h]after reviewing the district court’s detailed order and reviewing the pleadings and briefs filed by the parties and amicus curiaewe AFFIRM the judgment of the District Court that Continental has not asserted claims under Sections 1 and 2 of the Sherman Act. »

Practice Note: Although the end result did not change, the Fifth Circuit withdrew its previous finding that third-party beneficiaries of SSOs did not have constitutional status to sue.

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