XML 113 R20.htm IDEA: XBRL DOCUMENT v3.19.3.a.u2
Litigation and Legal Proceedings
12 Months Ended
Dec. 31, 2019
4. LITIGATION AND LEGAL PROCEEDINGS [Abstract]  
Litigation and Legal Proceedings LITIGATION AND LEGAL PROCEEDINGS
COURT PROCEEDINGS
Huawei

China Proceedings

On January 3, 2019, InterDigital was notified that a civil complaint was filed on January 2, 2019 by Huawei Technologies Co., Ltd. and certain of its subsidiaries against InterDigital, Inc. and certain of its subsidiaries in the Shenzhen Intermediate People’s Court (the "Shenzhen Court"). The complaint seeks a ruling that the InterDigital defendants have violated an obligation to license their patents that are essential to 3G, 4G and 5G wireless telecommunication standards on fair, reasonable and non-discriminatory ("FRAND") terms and conditions. The complaint also seeks a determination of the terms for licensing all of the InterDigital defendants’ Chinese patents that are essential to 3G, 4G and 5G wireless telecommunication standards to the Huawei plaintiffs for the plaintiffs’ wireless terminal unit products made and/or sold in China from 2019 to 2023. On September 17, 2019, InterDigital filed a petition challenging the jurisdiction of the Shenzhen Court to hear the action. On December 25, 2019, InterDigital was notified that the Shenzhen Court rejected InterDigital's jurisdictional challenge. On January 23, 2020, InterDigital filed an appeal of the Shenzhen Court's decision to deny InterDigital's jurisdictional challenge with the IP Tribunal of the China Supreme People's Court. InterDigital's appeal is pending.

U.K. Proceedings

On December 3, 2019, InterDigital, Inc. and certain of its subsidiaries filed a claim in the High Court of Justice, Business and Property Courts of England and Wales, Intellectual Property List (Chancery Division), Patents Court (the "High Court") against Huawei Technologies Co., Ltd. and Huawei Technologies (UK) Co., Ltd. ("Huawei UK"). The claim alleges infringement of five of InterDigital's patents relating to 3G, 4G/LTE and/or 5G standards: European Patent (U.K.) Nos. 2,363,008; 2,421,318; 2,485,558; 2,557,714; and 3,355,537.

In these proceedings, InterDigital is seeking a declaration that the terms offered by InterDigital to Huawei for a worldwide license are consistent with InterDigital's FRAND commitments, or, alternatively, a determination of FRAND terms for a license to the litigated patents. InterDigital is also seeking a 'FRAND injunction' of the type previously awarded by the High Court in Unwired Planet v. Huawei (such injunction, a "FRAND Injunction"), preventing further infringement of the litigated patents where the court has settled the terms of a worldwide FRAND license and the defendant does not enter into a license on those terms, along with other relief concerning declarations, damages and costs.

On December 20, 2019, Huawei UK filed an application seeking an extension of time to challenge the jurisdiction of the High Court to hear the action against it until the later of January 17, 2020 or fourteen days following the Supreme Court of the United Kingdom's (the "U.K. Supreme Court") decision in Unwired Planet v. Huawei and Conversant v. Huawei and ZTE (together, the "Unwired Planet and Conversant Cases"). On January 17, 2020, the parties filed a consent order directing that Huawei UK's challenge to the jurisdiction of the High Court be heard before July 31, 2020, and setting the deadline for Huawei UK to file its application challenging jurisdiction to be fourteen days following the Supreme Court's decision in the Unwired Planet and Conversant Cases, which the court entered into with minor amendments. On January 24, 2020, the High Court listed Huawei UK's application challenging jurisdiction to be heard between July 1 and July 3, 2020.
Lenovo
U.K. Proceedings
On August 27, 2019, InterDigital, Inc. and certain of its subsidiaries filed a claim in the High Court against Lenovo Group Limited and certain of its subsidiaries. The claim, as amended, alleges infringement of five of InterDigital's patents relating to 3G and/or 4G/LTE standards: European Patent (U.K.) Nos. 2,363,008 (the "'008 Patent"); 2,421,318; 2,485,558; 2,557,714; and 3,355,537.
In these proceedings, InterDigital is seeking a FRAND Injunction, preventing further infringement of the litigated patents where the court has settled the terms of a worldwide FRAND license and the defendant does not enter into a license on those terms, along with other relief concerning declarations, damages and costs.
On October 3, 2019, Lenovo filed an application challenging the jurisdiction of the High Court to hear the action, as well as the order which permitted service outside of the United Kingdom with respect to the U.S. and Hong Kong defendants (the "Lenovo Jurisdiction Challenge"). The High Court listed the Lenovo Jurisdiction Challenge to be heard over two days between February 24 and February 27, 2020. On February 11, 2020, Lenovo filed an application seeking to adjourn the Lenovo Jurisdiction Challenge to allow time for the U.K. Supreme Court to issue its ruling in the Unwired Planet and Conversant Cases. On February 17, 2020, the parties filed a consent order adjourning the hearing of the Lenovo Jurisdiction Challenge until between May 5, 2020 and July 30, 2020.

Also on February 11, 2020, the High Court listed a five-day trial in relation to the '008 Patent to begin between March 1, 2021 and March 5, 2021. On February 17, 2020, the High Court listed a second five-day trial to begin on June 21, 2021. The patent in suit to be addressed at such trial, if not previously agreed, will be determined at a case management conference scheduled to take place in late May, 2020, with the exact date to be determined. Also at the case management conference, the parties will ask the High Court to determine directions for the remaining trials in the proceedings if they cannot be agreed.
District of Delaware Proceedings
On August 28, 2019, InterDigital, Inc. and certain of its subsidiaries filed a complaint in the United States District Court for the District of Delaware (the "Delaware District Court") against Lenovo Holding Company, Inc. and certain of its subsidiaries alleging that Lenovo infringes eight of InterDigital's U.S. patents—U.S. Patent Nos. 8,085,665 (the "'665 Patent"); 8,199,726 (the "'726 Patent"); 8,427,954 (the "'954 Patent"); 8,619,747; 8,675,612 (the "'612 Patent"); 8,797,873 (the "'873 Patent"); 9,203,580; and 9,456,449 (the "'449 Patent")—by making, using, offering for sale, and/or selling Lenovo wireless devices with 3G and/or 4G LTE capabilities. As relief, InterDigital is seeking: (a) a declaration that InterDigital is not in breach of its relevant FRAND commitments with respect to Lenovo; (b) to the extent Lenovo does not agree to negotiate a worldwide patent license, does not agree to enter into binding international arbitration to set the terms of a FRAND license, and does not agree to be bound by the FRAND terms to be set by the High Court in the separately filed U.K. Proceedings described above, an injunction prohibiting Lenovo from continued infringement; (c) damages, including enhanced damages for willful infringement and supplemental damages; and (d) attorneys’ fees and costs.
On November 4, 2019, Lenovo filed a motion to dismiss InterDigital's patent infringement claims for six of the eight litigated patents—the '873, '665, '954, '726, '449 and '612 Patents—on the basis that such patents allegedly are not directed to patent-eligible subject matter. On December 9, 2019, InterDigital amended its complaint and on January 10, 2020, Lenovo filed a renewed motion to dismiss the same claims from InterDigital's amended complaint as they moved to dismiss from the original complaint. On February 7, 2020, InterDigital filed its opposition to Lenovo's renewed motion to dismiss InterDigital's amended complaint. Lenovo's response to InterDigital's opposition is due on February 21, 2020.
Asustek
Information regarding the legal proceeding that Asustek Computer Incorporated ("Asus") filed against InterDigital, Inc. and certain of its subsidiaries in the U.S. District Court for the Northern District of California (the "CA Northern District Court") on April 15, 2015 can be found in the description of legal proceedings contained in InterDigital's Annual Report on Form 10-K for the fiscal year ended December 31, 2018 as filed with the SEC on February 21, 2019 (the "2018 Form 10-K").
On March 11, 2019, as a result of the CA Northern District Court's ruling on December 20, 2018 that Asus was judicially estopped from arguing that the parties’ April 2008 patent license agreement was not entered into on FRAND terms and conditions, Asus revised its damages calculations downward, and updated the calculations to include sales through 2018. Asus was seeking damages for what it called "4G capable products" in the amount of $58.3 million for sales through 2018. Any damages attributable to a violation Section 2 of the Sherman Act would have been subject to mandatory trebling, as well as an award of reasonable attorneys' fees.
On April 4, 2019, Asus informed the court that it would not be proceeding to trial on its waiver and Delaware Consumer Fraud Act claims. A jury trial on Asus’ remaining claims—violation of Section 2 of the Sherman Act and breach of contract resulting from ongoing negotiations—was scheduled to commence on May 6, 2019 in the CA Northern District Court.
On April 9, 2019, the parties participated in another court-mandated settlement conference. On April 12, 2019, certain subsidiaries of InterDigital entered into a Settlement Agreement and First Amendment to the Patent License Agreement with Asus (the “Asus Settlement Agreement”), pursuant to which, among other things, the parties agreed to a multi-year amendment to the 2008 Asus PLA that added coverage for 4G technologies and amended certain other terms. The parties also agreed to dismiss all outstanding litigation and other proceedings among the parties. Accordingly, the action in the CA Northern District Court described herein was dismissed on April 15, 2019, and there are no further proceedings in this matter.
ZTE USITC Proceedings and Related Delaware District Court Proceedings
Information regarding legal proceedings that InterDigital filed against ZTE Corporation and ZTE (USA) Inc. (collectively, "ZTE") with the United States International Trade Commission ("USITC") and the Delaware District Court can be found in the description of legal proceedings contained in InterDigital's 2018 Form 10-K. With respect to the Delaware District Court proceeding related to the 2013 USITC Proceeding (337-TA-868), on January 23, 2019, InterDigital and ZTE filed a joint status report that informed the Delaware District Court of the Federal Circuit's decision regarding the '966 and '847 patents and that the PTAB proceedings regarding the '244 patent remained pending. The parties jointly requested that the case remain stayed so that the portion of the case related to damages potentially owed by ZTE as to the three patents-in-suit could be coordinated. The court granted that request on January 25, 2019.
On October 18, 2019, InterDigital and ZTE entered into a Patent License Agreement (the "ZTE PLA") pursuant to which the parties agreed that, upon the performance of certain obligations by ZTE, the parties would end all legal proceedings initiated by either party or otherwise pending between them. Pursuant to the ZTE PLA, on October 25, 2019, ZTE filed an unopposed motion with the Federal Circuit to withdraw from the appeal of the PTAB’s remand ruling that claim 8 of the ’244 patent is invalid. On November 22, 2019, the Federal Circuit reversed and vacated the PTAB's remand decision. The court's mandate issued on December 30, 2019.

Also on December 30, 2019, InterDigital and ZTE filed a stipulation and proposed order to dismiss the Delaware District Court proceedings related to the 2011 USITC Proceeding (337-TA-800) and 2013 USITC Proceeding (337-TA-868), which was granted by the court on January 2, 2020. There are no further proceedings in either of these matters.

REGULATORY PROCEEDING
Investigation by National Development and Reform Commission of China
On September 23, 2013, counsel for InterDigital was informed by China's National Development and Reform Commission ("NDRC") that the NDRC had initiated a formal investigation into whether InterDigital has violated China's Anti-Monopoly Law ("AML") with respect to practices related to the licensing of InterDigital's standards-essential patents to Chinese companies. Companies found to violate the AML may be subject to a cease and desist order, fines and disgorgement of any illegal gains. On March 3, 2014, the Company submitted to NDRC, pursuant to a procedure set out in the AML, a formal application for suspension of the investigation that included proposed commitments by the Company. On May 22, 2014, NDRC formally suspended its investigation of the Company based on the commitments proposed by the Company. The Company's commitments with respect to the licensing of its patent portfolio for wireless mobile standards to Chinese manufacturers of cellular terminal units ("Chinese Manufacturers") are as follows:
1.
Whenever InterDigital engages with a Chinese Manufacturer to license InterDigital's patent portfolio for 2G, 3G and 4G wireless mobile standards, InterDigital will offer such Chinese Manufacturer the option of taking a worldwide portfolio license of only its standards-essential wireless patents, and comply with F/RAND principles when negotiating and entering into such licensing agreements with Chinese Manufacturers.
2. 
As part of its licensing offer, InterDigital will not require that a Chinese Manufacturer agree to a royalty-free, reciprocal cross-license of such Chinese Manufacturer's similarly categorized standards-essential wireless patents.
3. 
Prior to commencing any action against a Chinese Manufacturer in which InterDigital may seek exclusionary or injunctive relief for the infringement of any of its wireless standards-essential patents, InterDigital will offer such Chinese Manufacturer the option to enter into expedited binding arbitration under fair and reasonable procedures to resolve the royalty rate and other terms of a worldwide license under InterDigital's wireless standards-essential patents.  If the Chinese Manufacturer accepts InterDigital's binding arbitration offer or otherwise enters into an agreement with InterDigital on a binding arbitration mechanism, InterDigital will, in accordance with the terms of the arbitration agreement and patent license agreement, refrain from seeking exclusionary or injunctive relief against such company.
The commitments contained in item 3 above expired on May 22, 2019. With the consolidation of China’s antimonopoly enforcement authorities into the State Administration for Market Regulation ("SAMR") in April 2018, SAMR is now responsible for overseeing InterDigital's commitments.
OTHER
We are party to certain other disputes and legal actions in the ordinary course of business, including arbitrations and legal proceedings with licensees regarding the terms of their agreements and the negotiation thereof. We do not currently believe that these matters, even if adversely adjudicated or settled, would have a material adverse effect on our financial
condition, results of operations or cash flows. None of the preceding matters have met the requirements for accrual or disclosure of a potential range as of December 31, 2019.