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Jury Levels $7.7 Million Judgment Against Huawei for H.264 Patent Infringement
The settlement says that H.264-related charges are not limited by FRAND (Fair, Reasonable and Non-Discriminatory) requirements, and may have implications for all users of H.264 encode and decode capabilities, especially Android devices.

In his Essential Patent Blog, intellectual property attorney David Long recently reported that a jury trial in Federal District Court in Texas found that Chinese smartphone manufacturer Huawei infringed upon an H.264-related patent owned by PanOptis, a non-practicing entity (NPE). The jury also found that the H264 award wasn’t limited by FRAND (Fair, Reasonable, and Non-Discriminatory) requirements typically applied to patents essential to a standard, and awarded PanOptis $7.7 million for a single H.264-related patent. According to Long, this lawsuit may have implications for all users of H.264 encode and decode capabilities, including those distributing H.264-encoded content, and particularly for those shipping Android devices.

By way of background, the lawsuit relates to Android Smartphones shipped by Huawei. The patent owned by PanOptis is called the ‘238 Patent in the lawsuit. Here’s the Q&A, followed by my analysis. 

Is the ‘238 patent claim non-FRAND because it’s not essential to the standard but was being used by Huawei? 
Long: The public record is not clear. My guess is that the ‘238 Patent claims were directed to one way, but not the only technical way, to implement the H.264 standard. So, some parts of the claims read onto portions of the standard, but also parts of the claims read onto the Android operating system’s way of implementing it. So, the ‘238 Patent may not have been essential to the H.264 standard and would not give rise to a FRAND commitment even if a FRAND commitment was raised. It’s also not clear whether any of the current or prior patent owners ever made a commitment to license the ‘238 Patent on FRAND terms if it was essential to the standard. Bottom line: Most likely the ‘238 Patent either was not essential to the H.264 standard or no FRAND licensing commitment had been made.

Did this somehow related to the use of the Android operating system?
Long: The ‘238 Patent did, because the infringement was based on both compliance with the H.264 standard and the Android operating system. It is not clear from the information I read how much that depended on the Android operating system or if there were other non-H.264/non-Android aspects of the Huawei products on which infringement was found.

How does this potentially impact companies shipping Android-based products? 
Long: Any company using the H.264 standard on an Android operating system may be interested in what has [happened] and does happen in this case with respect to the ‘238 Patent.

Does this relate to generic H.264 encode/decode technology or a specific chipset?
Long: Not clear. The case appears to have found that at least part of the ‘238 Patent claims read onto the H.264 standard, so those parts of the patent claims may be met regardless of what specific H.264 chipset is used. But other parts of the patent claims apparently read onto specific ways that a particular product implements the H.264 standard, such as the specific way the Android operating system and Huawei products implemented the H.264 standard—i.e., probably why this was deemed an “implementation” patent and not a standard essential patent. So someone wanting to know whether the ‘238 Patent claims reads onto a particular H.264 chipset or product based on this case decision would need to see whether the remainder of the ‘238 Patent claims—i.e., the portion of the claims that don’t read onto the H.264 standard—are implemented in a way like the Android operating system and Huawei devices found to infringe.

Does this potentially impact any company shipping H.264 encode/decode technology? 
Long: [That] depends on [the] similarity to how [the] Android operating system implemented the H.264 standard or otherwise met claims of the ‘238 Patent.

Does this potentially impact any company shipping content encoded with H.264? 
Long: It depends on the patent claims, which may cover the act of encoding/decoding, but may not cover the encoded content itself, which seems fairly common. Even in that case, however, there might be a claim that sending encoded content will induce others to decode that content, which might give liability for induced infringement. As with all other responses on this matter, it will depend, and someone should not make a decision without seeking the advice of competent counsel based on the specific circumstances of your situation.

Are the awards ongoing or did Huawei stop using the infringing technology? 
Long: The award technically was a running royalty for products that have been sold. PanOptis probably will move to have the court award a continuing royalty as long as Huawei does not change its products to stop practicing the claimed invention.

Analysis

In July 2017, Apple paid Nokia more than $2 billion in part relating to alleged H.264 infringement by Apple. Now we have the PanOptis judgement, which says that, at least in this case, H.264-related charges are not limited by FRAND. 

Clearly, if PanOptis owns technology that Huawei infringed upon, the judgment is correct. However, both of these judgments indicate that the standard-setting process is broken. A company should be able to deploy a technology knowing absolutely how much it will cost; it’s how we buy everything from gas to groceries. The current standard-setting process not only prevents this, but it promotes contrary behavior like the appearance of patent pools four years after the technology is finalized. 

This is why groups like the Alliance for Open Media exist. It’s also why HEVC is foundering, and why the next-generation Versatile Video Coding (VVC) codec will similarly fail, or at least fail to reach its full potential unless MPEG revamps how it makes their technologies available for commercialization.