Legal

Checking Essentiality within Access Advance - An HEVC Case Study

Some patent holders and pools designate their patents as relevant or essential to a standard without proper scrutiny or analysis. As part of an ongoing series examining this dubious practice, we highlight U.S. Patent 10,575,014. The ‘014 patent is owned by the Electronics and Telecommunications Research Institute (ETRI) and Korea’s Kyung Hee University. The ‘014 patent is purportedly essential to the H.265 (HEVC) standard as part of the Access Advance Patent Pool and it is part of a family of at least 30 applications globally. It should not be considered essential. 

The ‘014 patent is directed to the encoding/decoding and partitioning/reconstruction phases of video coding. Generally, instead of transmitting every frame (i.e., image) of every video, including its corresponding data, the encoder and decoder will each generate a prediction of the image and only transmit the difference between the prediction and the original image (i.e., the residual). The decoder will then use its prediction (and the residual, if one was sent) to reconstruct the image. 

The ‘014 patent requires that when residual information is sent from the encoder to the decoder, then the decoder will add it to the predicted pixel values it generated in order to reconstruct the image. See, e.g., claim 1 (“generating the target block based on an intra prediction value and the residual block information”). However, when the encoder decides not to send residual information for a given pixel, the decoder then must look to a neighboring pixel in order to generate the reconstructed image. See, e.g., claim 1 (“generating the target block based on intra prediction direction information decoded from the bitstream”). Stated differently, the ‘014 patent creates a dependency between the prediction mode and the residual flag designating whether or not residual information was transmitted. 

HEVC, in contrast, does not have the same dependency that the ‘014 patent requires. In HEVC, when the decoder decides not to send residual information, the reconstructed image is generated based on the predicted pixel value (not the value of a neighboring block). See HEVC, §§ 7.4.9.5, 7.3.8.8, 7.4.9.8, 9.3.3, 9.3.3.8.  Indeed, in the HEVC syntax tree, the predicted value and the flag that designates whether residual information is sent are separate and distinct elements. See HEVC, § 7.3.8.5. They are, simply, not dependent on one another. In modern coding, predictions are accurate and a necessary first step in the order of operations. Thus, there is little reason to complete a prediction, then ignore it in favor of using the neighboring block’s value when reconstructing an image.     

Thus, the ‘014 patent does not appear to be essential to the HEVC standard even though it has been declared essential and actively licensed as being so. The public would benefit from appropriate scrutiny of such large patent pools that allegedly cover critical technical standards. 

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FTC Highlights SEP Antitrust Abuses

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The recent remarks of FTC Commissioner Rebecca Kelly Slaughter on standards essential patents (“SEPs”) are commendable, as is her emphasis on the role antitrust law plays in curtailing anticompetitive abuses of them. The abuses Slaughter highlights mostly impact small- and medium-sized businesses, “the ‘little engines that could’ of our economy,” who lack the resources to navigate complex legal issues and are “more likely to cave to supra-FRAND rates out of fear of exclusion.” Patents do not grant companies a free pass to abuse their dominant market positions through anticompetitive means.

Commissioner Slaughter emphasized that patents are not—and cannot become—an absolute shield for anti-competitive conduct by SEP holders: “When patent holders obtain market power by virtue of being included in standards, the way they exercise that market power is not immunized from the antitrust laws merely because patents are involved.” Specifically, owners of SEPs are obligated to license their patents to willing licensees on fair, reasonable, and non-discriminatory (“FRAND”) terms, and U.S. antitrust policy plays an important role in policing those matters.

Clear antitrust policies are imperative to ensure sincere FRAND licensing practices. Without definite antitrust policies, SEPs can skirt FRAND requirements, leading to “holdup,” or the practice of prohibiting businesses from implementing technologies that implement standards unless they agree to higher royalties and more unfavorable licensing terms than the SEP owner could have obtained before the standard was set, when alternative technologies were available.

Commissioner Slaughter identified three examples of holdup evincing anticompetitive conduct: (1) refusing to license a SEP to any willing licensee in violation of a FRAND  commitment, (2) conditioning an SEP license on taking or giving a cross-license to non-essential patents or that are SEPs of unrelated standards (i.e., bundling), and (3) requiring a license to a portfolio where some or all of the patents are not even identified, let alone provided with the relevant information needed by a potential licensee to assess whether the patents under negotiation are valid, enforceable, and essential to the standard’s implementation, or offered on non-discriminatory terms.

This disproportionately affects small businesses, who lack the bargaining power to negotiate with SEP owners and the resources to defend against SEP assertions. Theoretically, federal judges occasionally enforce FRAND terms in patent cases, but as Commissioner Slaughter pointed out, that case needs to first get to court and continue on to a point to reach such a decision, and “if small and medium entities are agreeing to supra-FRAND terms because they are afraid of the threat of exclusion after litigation, there necessarily will not be a high volume of cases challenging licensing demands.”

Commissioner Slaughter also underscored the role that standards-developing organizations, or SDOs, have in setting policies that would facilitate licensing and prevent inefficient litigation. SDOs can institute policies that mitigate the harms of holdup by mandating commitments from participants to disclose and/or license standard-essential patents on FRAND terms. SDO policies can also clarify how a reasonable rate may be determined. For example, SDOs may specify a narrow set of circumstances in which injunctive or other exclusionary relief may be an appropriate remedy for “holdout,” i.e., when a potential licensee unilaterally refuses to take a license or unreasonably delays in  doing so.[1]

Commissioner Slaughter’s message that “antitrust laws have an important role to play in the standard-setting context, including conduct related to the use or abuse of SEPs” is laudable. The application of antitrust law in congruence with sound SDO policies to promote “widespread and efficient licensing” at “actual FRAND rates” can reward genuine innovation while also preventing abuses by SEP holders, including assertion of poor-quality, SEP-questionable patents.

[1] As Commissioner Slaughter pointed out, absent collusion, holdout does not pose the same concerns from an antitrust standpoint as holdup, which has the potential to exclude firms from implementing a standard and hurting customer choice among competitors. While competition and consumers are harmed indefinitely when market power is exploited to engage in holdup, there are remedies for holdout.

Fintiv challenged in SCOTUS Amicus by Unified

On January 14, 2022, Unified Patents filed an amicus brief with the Supreme Court in support of the petition for certiorari in Intel Corp. v. VLSI Tech. LLC, challenging the USPTO's reliance on their own NHK-Fintiv ruling, as well as the reviewability of such a de facto rule on appeal.

Unified Patents is represented by Bill Jenks of Jenks IP and by in-house counsel, Jung Hahm and Jonathan Stroud. Read the amicus brief below:

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Access Advance, Who is Checking Essentiality? -- An HEVC Case Study

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Some patent holders and pools designate their patents as relevant or essential to a standard without proper scrutiny or analysis. As part of an ongoing series examining this dubious practice, we highlight U.S. Patent 9,838,714. The ‘714 patent is owned by the Electronics and Telecommunications Research Institute (ETRI), is purportedly essential to the H.265 (HEVC) standard as part of the Access Advance Patent Pool, and is part of a family of at least 29 applications globally. It should not be considered essential.   

The ‘714 patent is directed to the prediction phase of video coding, specifically, how to scan the decoded signals during intra-prediction. In this process, there is a specific order in which the values of a block (e.g., a 4x4 or 8x8 transform block) are processed. The ‘714 patent requires that the first row or column is scanned first, before any other column or row. See, e.g., claim 1 (“scanning entropy-decoded signals of a first row with priority so that all of the entropy-decoded signals of the first row are scanned prior to scanning entropy-decoded signals of any other row”). 

In contrast, the HEVC standard does the opposite. As illustrated below, the HEVC standard requires scanning in “reverse order,” meaning that the last row is scanned first (from right to left) or the last column is scanned first (from bottom to top). See HEVC, § 7.3.8.11. 

See T.Nguyen, “Transform coding techniques in HEVC,” IEEE Journal of Selected Topics in Signal Processing, vol. 7, no. 6, 978-989, Dec. 2013. The HEVC standard can scan in the diagonal (§ 6.5.3), horizontal (§ 6.5.4), or vertical (§ 6.5.5) directions for intra-mode prediction, but again, it does so in the “reverse order” direction, not the direction claimed by the ’714 patent.  

​​Thus, the ‘714 patent does not appear to be essential to the HEVC standard even though it has been declared essential and actively licensed as being so. The public would benefit from appropriate scrutiny of such large patent pools that allegedly cover critical technical standards.

Unified Patents Inc.’s Real Party-in-Interest and Discretionary Decisions

For the past nine years, across more than 250 inter partes, post-grant reviews, and other forms of administrative challenge, Unified Patents, LLC has won every real party-in-interest (RPI) challenge, both at institution, final written decision, and on appeal. It has also won all Fintiv related discretionary arguments and all Arthrex remands, as detailed below.

Unified’s status as the sole RPI was challenged in its first IPR where the Board held that Unified was the sole RPI. Unified Patents Inc. v. Clouding IP, LLC, IPR2013-00586, Paper 9 (Mar. 21, 2014) (members were not found to be RPIs, where there was no evidence of funding or control of the particular IPR; challenged claims were later cancelled in a Final Written Decision issued April 26, 2015). As catalogued below, Unified overcame every such challenge in the proceeding years. As a result, many times Unified’s RPI status was no longer being challenged. 

In 2018, the Federal Circuit had their first and (possibly only) opportunity to review the Board’s developing RPI jurisprudence in a case involving a different membership organization. That opinion endorsed the Board’s longstanding RPI test set forth in the Trial Practice Guide, but outlined facts particular to that situation (including a potential time-bar) and characteristics of that different membership organization that merited further scrutiny on remand. See Applications in Internet Time, LLC v. RPX Corp., 897 F.3d 1336 (July 9, 2018) (“AIT”). It remanded for further fact finding but was troubled with the presence of a time bar, lengthy communications with the barred party (who had unsuccessfully challenged the patent previously), and with the RPX business model of acting as a third-party middleman for settlement negotiations.  

The AIT decision led to additional challenges to Unified’s RPI status.  In every ruling following the AIT decision, Unified was again found to be the sole RPI, without exception. 

Then in May of 2020, the Federal Circuit held that 35 U.S.C. § 314(d) precludes judicial review of the Board’s RPI determinations under 35 U.S.C. § 312 entirely, see ESIP Series 2, LLC v. Puzhen Life USA, LLC, 958 F.3d 1378 (Fed. Cir. 2020), extending the Supreme Court’s holding earlier that year that 35 U.S.C. § 315 time bar determinations were likewise unreviewable, Thryv, Inc v. Click-To-Call Techs., LP, 140 S. Ct. 1367 (2020), thus foreclosing most direct judicial review of Board RPI determinations, making it unlikely that the Federal Circuit will review or alter future board determinations. It later held that appeals on RPI in Unified cases were likewise unreviewable. See Fall Line Patents, LLC v. Unified Patents, LLC, No. 2019-1956 (Fed. Cir. July 28, 2020), remand denied, Paper 49 (PTAB Nov. 6, 2021). 

Shortly thereafter, the Board finally ruled on the remanded Applications in Internet Time, LLC v. RPX Corp. case, finding that, based on the facts of RPX, including a potential time bar, extensive pre-filing communications, a previous failed challenge, and the unique business model of RPX, they were a real party-in-interest acting at the behest of a time-barred party, and terminated the case. RPX Corp. v. Applications in Internet Time, LLC, IPR2015-01750, Paper 128 (Oct. 2, 2020) (“AIT Remand”). The Board termination applied existing orders, precedent, and case law to this ‘highly fact-dependent question,’ including all of the preexisting cases finding no problems with Unified’s business model and consistent approach. AIT, 897 F.3d at 1342 (citations omitted). 

Every panel to decide the issue thereafter has found that Unified’s business model is fundamentally different than RPX’s. Panels have noted that, contrary to RPX, which seeks to extricate clients from litigation by negotiating on behalf of defendants and acting as an “intermediary between patent owners and operating companies,” AIT Remand, 11-15, Unified is no dealmaking middleman, and “acts independent of its members or any other company.” It has found that neither the manner of how Unified selects cases nor the business model itself render any members RPIs, and the Board has repeatedly distinguished facts as they apply to Unified.  See, e.g., Velos Media, LLC, IPR2019-00707, Paper 55 (Sept. 3, 2020); Velos Media, LLC, IPR2019-00635, Paper 45 (Aug. 18, 2020); American Patents, LLC, IPR2019-00482, Paper 115 (Aug 13, 2020); Barkan Wireless, Inc., IPR2018-01186, Paper 57 (Dec. 4, 2019).

Additionally, the same day the Board rules the AIT Remand decision precedential, it likewise designated as precedential the case of SharkNinja Operating LLC v. iRobot Corp., IPR2020-00734, Paper 11 (Oct. 6, 2020) (“SharkNinja”). That case holds that “no real party-in-interest analysis is necessary at the institution phase absent an allegation of a time bar or estoppel under 35 U.S.C. § 315.” See Unified Patents, LLC v. Fat Statz LLC, IPR2020-01665, Paper 19 (Apr. 16, 2021) (institution). In all subsequent Unified decisions, the Board has determined that no RPI analysis was necessary, either at institution or at final written decision, absent a time bar. See, e.g., Unified Patents, LLC v. Justservice.net LLC, IPR2020-01258, Paper 18 (Feb. 18, 2021) (institution) (“we need not address whether a party is an unnamed RPI unless the time bar or estoppel provisions under 35 U.S.C. § 315 would be implicated”). 

​​Additionally, no Unified petition has been denied under the Board’s expanded understanding of their discretionary denial powers adopted in 2017. See Gen. Plastic Indus. Co. v. Canon Kabushiki Kaisha, IPR2016-01357, Paper 19 at 9–10, 16 (Sept. 6, 2017) and Apple Inc. v. Fintiv, Inc., IPR 2020-00019, paper 11 (PTAB Mar. 20, 2020). See also Snap, Inc. v. SRK Technology LLC, IPR2020-00820, Paper 15 (Oct. 21, 2020) (precedential as to § II.A) (instructing the Board to take a “holistic view” of the factors and declining to deny institution). 

Indeed, in every post-grant challenge that has raised arguments related to these discretionary denials, the Board has ignored or declined patent owner arguments that General Plastic or Fintiv applies. See, e.g., Unified Patents, LLC v. Oceana Innovations LLC, IPR2020-01463, Paper 11 (Feb. 23, 2021) (“We agree with Petitioner that the General Plastic factors weigh against denying an inter partes review under the circumstances here”). 

Lastly, Unified has not lost a Director review request under Arthrex. See Smith & Nephew Inc. v. Arthrex Inc., No. 19-1452 (U.S. June 21, 2021) (remanding then-pending appeals to allow for requests for Director review); see, e.g., Fall Line Patents, LLC v. Unified Patents, LLC, IPR20 (Fed. Cir. 2020) (remanding), request for review denied, Paper 49 (Nov. 6, 2021).

As catalogued below, Unified has been distinguished from AIT in every decision following that decision and the remand. The PTAB has thoroughly reviewed this issue in numerous cases when confirming that Unified was the sole RPI.

Exemplary “Discretionary” Institution Decision

  • Institution over arguments related to Apple Inc. v. Fintiv, Inc., IPR2020-00019, Paper 11 (PTAB Mar. 20, 2020) (precedential) (“Fintiv I”), with four parallel district court proceedings in the Western District of Texas’s Waco Courthouse before Judge Alan Albright scheduled near to the statutory final written decision. Finding that the ersatz trial dates scheduled were likely to shift, and discounting scheduled “earliest possible” trial date for some later “actual trial date” (emphases in original). Additionally, noting the merits as “strong,” thus favoring institution. See Unified Patents, LLC v. NavBlazer, LLC, IPR2020-00983, Paper 11 (PTAB Dec. 16, 2020).

Post-AIT Decisions

  • Federal Circuit opinion finding the Board’s decision that Unified Patents was the sole RPI (and cancelling all challenged claims) unreviewable in light of ESIP Series 2, LLC v. Puzhen Life USA, LLC, 958 F.3d 1378 (Fed. Cir. 2020) (nonprecedential), and remanding for Arthrex proceedings (subsequently denied by the Director’s office without comment). Fall Line Patents, LLC v. Unified Patents, LLC, No. 2019-1956 (Fed. Cir. July 28, 2020), remand denied, Paper 49 (PTAB Nov. 6, 2021). 

  • Board final written decision holding Unified had properly identified the real parties in interest, rejecting arguments that all zone members should all be named. Holding that “Patent Owner … has not identified an aspect of Petitioner’s business structure that we view as showing the alleged unnamed real parties in interest are clear beneficiaries with respect to this proceeding that have a preexisting, established relationship with Petitioner.” Unified Patents, LLC v. Velos Media, LLC,, IPR2019-00707, Paper 55 (PTAB Sept. 3, 2020) (final written decision) (cancelling claims and denying motion to amend). 

  • Final written decision holding that all RPIs had been properly named, rejecting arguments that several members of Unified’s Video Codec zone should have been named; noting that, absent any allegation that any of the RPIs “would have barred the Petition under 35 U.S.C. § 315,” Board did not need to reach the issue, but reaching it favorably nonetheless. Unified Patents, LLC v. Velos Media, LLC, IPR2019-00763, Paper 48 (PTAB Sept. 29, 2020) (final written decision). 

  • Institution and later final written decision holding that the general benefit a member may receive from Unified’s petition does not make the member an RPI. In addition, evidence that a company is a corporate affiliate of a Unified member is not by itself sufficient to place RPI in dispute; that decision was affirmed on Final Written decision.

    • Unified Patents, LLC v. American Patents, LLC, IPR2019-00482, Paper 36 (PTAB Aug. 6, 2019) (institution decision); Paper 115 (PTAB Aug. 13, 2020) (“[W]e again are persuaded that the Petition complied with 35 U.S.C. § 312(a)(2) because Member is not an RPI.”).

  • Institution decision holding that Unified is the sole RPI and that the mere fact that a member asserted invalidity using the same prior art in district court after Unified filed its petition is not enough, without more, to show a member is an RPI. 

  • Final decision holding that Unified properly identified all RPIs and that a member “is not an unnamed RPI [. . .] based on any of the following: its membership with Unified; the alleged control over this IPR; or the relationship between [the member] and Unified and the alleged benefit of the IPR to [the member].” 

    • Unified Patents Inc. v. Cellular Communications Equipment, LLC, IPR2018-00091, Paper 69 (PTAB May 22, 2019).

  • Final decision holding that Unified was the sole RPI and that a member’s decision to file its own petition further supports the conclusion that Unified was not acting under the control or direction of the member.

  • Final decision holding that Unified was the sole RPI and a member that may benefit from Unified filing the IPR is not an RPI without showing some other evidence of a specific interest in the particular proceeding. Unified’s business model alone was not enough for a member to be found as an RPI.

  • Final decision holding that Unified’s IPR was not controlled, funded, nor filed at the behest of one of its members. Found that membership fees are used to fund a variety of Unified’s deterrence activities (“Petitioner is not solely an inter partes review-filing entity”) and distinguishing the factors at issue in the AIT decision. “[W]e do not have evidence that Petitioner is representing any particular interest of [a particular member] here. Rather, the evidence shows Petitioner is representing the general interest that all subscribers to Petitioner’s have in mitigating litigation risk from patents in those zones.”

  • Final decision finding that Unified’s status as the sole RPI is not in question because “Petitioner’s members join particular zones [and] Petitioner files IPRs on behalf of those zones[.]”

  • Institution decision holding that Unified properly identified itself as the sole RPI considering that neither no members had control of, provided funding or direction to, or received a specific benefit (e.g., to purposefully circumvent the one year time-bar) from the filing of the petition. 

    • Unified Patents Inc. v. Barkan Wireless IP Holdings, LP, IPR2018-01186, Paper 27 at 15-16 (Jan. 8, 2019).

  • Institution decision holding that the general benefit members received from Unified’s common practice of filing IPRs in relevant technology areas was insufficient to demonstrate a specific benefit as discussed in AIT even when combined with evidence that Patent Owner engaged in licensing discussions with the alleged RPIs prior to Unified’s petition. 

  • Institution decision holding that evidence consisting solely of generic statements from Unified’s web page that generally describe its business, but did not refer to any particular member was insufficient to demonstrate that the petition failed to name all RPIs. 

  • Institution decision rejecting Patent Owner’s argument that all members of Unified’s Content Zone are RPIs, explaining that “there is no evidence that any of Petitioner’s members controlled, directed, or directly financed this proceeding.” 

    • Unified Patents Inc. v. Realtime Adaptive Streaming, LLC, IPR2018-00883, Paper 36 at 16-17 (Nov. 27, 2018) (further noting that there was 1) no communication between Unified and any member regarding the petition or underlying litigation involving the patent; 2) no corporate relationships between Unified and members other than the membership agreement; 3) no evidence of a “very significant payment” shortly before Unified filed its IPR; and 4) no evidence that any member desired review of the patent but was time-barred from doing so.).

    • In a precedential decision, the Board has further cited Realtime Adaptive to prohibit overextending AIT to situations that include a general benefit and a relationship with the Petitioner. Ventex Co. v. Columbia Sportswear N. Am., Inc., IPR2017-00651, Paper 152 at 10 (PTAB Jan. 24, 2019) (precedential) (citing Unified Patents, Inc. v. Realtime Adaptive Streaming, LLC, IPR2018-00883, Paper 36 at 14–15 (PTAB Oct. 11, 2018)).  

  • Final decision holding that “the evidence shows that Petitioner makes all decisions regarding any inter partes review proceeding, including which patents to challenge, without input from its members, and that Petitioner alone bears all costs of any such proceeding.” 

  • Unified Patents Inc. v. Plectrum LLC, IPR2017-01430, Paper 30 at 9-10 (Nov. 13, 2018); id., Paper 8 (Nov. 14, 2017) (institution decision holding that “[t]he mere fact that members provide payment to Petitioner for a subscription to Petitioner’s services alone is insufficient to show that these members are funding this particular inter partes review.”).

Pre-AIT Decisions

  • Institution decision holding that Unified’s revenue coming from annual membership subscription fees does not make members an RPI even if timing of some of those funds was used to argue that the funds could have been used to file the IPR. “The evidence does not show an obligation on Unified’s part to file inter partes review proceedings on behalf of any member in return for payment, nor does it show that Unified’s members have any control over when and how Unified spends the revenue received from its members.”

  • Final decision holding that, in view of Petitioner’s identification of itself as the sole RPI,  shifted the burden to the patent owner failed to produce sufficient evidence tending to place the RPI issue in dispute. Patent owner produced no evidence and thus never shifted the burden.  

  • Institution decision finding that Unified’s revenue coming from annual membership subscription fees does not make members an RPI even if timing of some of those funds was used to argue that the funds could have been used to file the IPR.  

  • Institution decision finding that RPI arguments not raising specific evidence of communications or direct funding to challenge any specific patent failed; a “mere possibility” of communications related to the selection of patents did not suffice. 

  • Institution decision holding that there must be actual evidence a member exerted control over a particular IPR, not “mere speculation,” to raise a question as to RPI. 

    • Unified Patents Inc. v. Qurio Holdings, Inc., IPR2015-01940, Paper 7 (Apr. 13, 2016) (claims canceled in response to patent owner’s request for adverse judgment).

  • Institution decision declined to investigate RPI, where Unified’s sworn statements were similar to those in the past and no new issues were raised. 

    • Unified Patents Inc. v. TransVideo Elects., Ltd. IPR2015-01519, Paper 8 (Jan. 15, 2016) (claims canceled in response to patent owner’s request for adverse judgment).

  • Institution decision holding that Unified’s members were not RPIs where there was no funding or control evidence relating to a specific IPR, even where Unified only filed IPRs against member-litigated patents. Distinguished from the adverse institution decisions in RPX . v. VirnetX, IPR2014-00171, -00172, -00173, -00174, -00175, -00176, -00177 (PTAB June 5, 2014)

  • Institution decision distinguished Unified from the In re Guan “Trollbusters” inter partes reexam decision cited in the PTAB Trial Practice Guide because Unified members did not “[pick] the patents to be challenged and [provide] funding for the particular proceedings[.]”  

  • Institution decision holding that the timing of Unified’s filing activities being potentially beneficial to particular members or parties did not make such members RPIs.  

  • Institution decision found that Unified’s members were not RPIs because there was no evidence of funding or control of this particular IPR.