UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA

Transcription

1 SHEPPARD, MULLIN, RICHTER & HAMPTON LLP A Limited Liability Partnership Including Professional Corporations STEPHEN S. KORNICZKY, Cal. Bar No. 1 skorniczky@sheppardmullin.com MARTIN R. BADER, Cal. Bar No. mbader@sheppardmullin.com MATTHEW W. HOLDER, Cal. Bar. No. mholder@sheppardmullin.com RYAN P. CUNNINGHAM, Cal Bar No. 1 rcunningham@sheppardmullin.com El Camino Real, Suite 00 San Diego, California -00 Telephone:.0.00 Facsimile:.0.1 DANIEL L. BROWN (Pro Hac Vice Pending) dbrown@sheppardmullin.com 0 Rockefeller Plaza, th Fl. New York, New York Telephone: Facsimile: Attorneys for Plaintiffs U-BLOX AG, U-BLOX SAN DIEGO, INC., AND U-BLOX AMERICA, INC., Plaintiffs, UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA v. INTERDIGITAL, INC.; INTERDIGITAL COMMUNICATIONS, INC; INTERDIGITAL TECHNOLOGY CORPORATION; INTERDIGITAL PATENT HOLDINGS, INC.; INTERDIGITAL HOLDINGS, INC.; and IPR LICENSING, INC. Defendants. Case No.: PLAINTIFFS MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF THEIR EX PARTE APPLICATION FOR TEMPORARY RESTRAINING ORDER AND ORDER TO SHOW CAUSE RE PRELIMINARY INJUNCTION Complaint Filed: January 1, 0-1-

2 TABLE OF CONTENTS Page I. INTRODUCTION... 1 II. FACTUAL BACKGROUND... A. Standard Setting Organizations and ETSI s IPR Policy... B. In Reliance on InterDigital s FRAND Obligations and Commitments, u-blox Becomes an InterDigital Licensee... C. To Coerce u-blox to Sign a Non-FRAND Agreement, InterDigital Interfered with u-blox s Customer Relationships... D.... E. InterDigital Must Be Enjoined From Threatening u-blox s Customer Relationships to the Extreme Detriment of u-blox... 1 III. ARGUMENT... 1 A. Applicable Legal Standards... 1 B. A TRO And Preliminary Injunction Should Be Granted u-blox is Likely to Succeed on the Merits of its Claims... 1 a. u-blox is Likely to Succeed on Its Declaratory Relief Claim... 1 b. u-blox is Likely to Succeed on Its Breach of Contract Claim... 1 c. u-blox is Likely to Succeed on Its Antitrust Claim... C. u-blox Will Suffer Irreparable Harm Absent A TRO And Preliminary Injunction InterDigital s Conduct Will Irreparably Harm u-blox s Goodwill and Reputation.... The Harm to u-blox... D. The Equities Weigh Heavily in u-blox s Favor... E. A Preliminary Injunction is in the Public Interest... IV. u-blox Should Not Be Required To Post a Bond... V. CONCLUSION... -i-

3 Federal Cases TABLE OF AUTHORITIES Page(s) Alliance for the Wild Rockies v. Cottrell F.d 1 (th Cir. 0)... 1 Auntie Anne s, Inc. v. Wang No. CV 1-0 MMM (EX), 01 WL 1 (C.D. Cal. July, 01)... Blindlight, LLC v. Cubbison No. LA CV-0 JAK (PLAx), 0 WL 0 (C.D. Cal. July, 0)... 1, Blizzard Entm t, Inc. v. Ceiling Fan Software LLC F. Supp. d 0 (C.D. Cal. 01)... 1 Broadcom Corp. v. Qualcomm Inc. 01 F.d (d Cir. 00)..., C & C Props. v. Shell Co. No. 1:1-CV-0-JAM-JLT, 01 WL 0 (E.D. Cal. Sept., 01)... 1, 1, 1 California v. Tahoe Reg l Planning Agency F.d 1 (th Cir. )... Certified Restoration Dry Cleaning Network v. Tenke Corp. F.d (th Cir. 00)... Eureka Fed. Sav. & Loan Ass n v. Am. Cas. Co. F.d (th Cir. )... 1 Extreme Reach v. Spotgenie Partners No. CV 1-0-DMG (JCGx), 01 WL 1 (C.D. Cal. Nov., 01)... Foremost Grps. Inc. v. Ayers Bath USA Corp. Case No. CV -0 GAF (Ex), 0 WL 1 (C.D. Cal. Dec. 0, 0) ii-

4 Granny Goose Foods, Inc. v. Brotherhood of Teamsters & Auto Truck Drivers 1 U.S. ()... 1 Henry Schein, Inc. v. Cook 1 F. Supp. d (N.D. Cal. 0)... 1 Huawei Techs., Co. v. Samsung Elecs. Co. No. :-cv-0-who, 0 WL 0 (N.D. Cal. Apr. 1, 0)... Image Tech. Servs., Inc. v. Eastman Kodak Co. 1 F.d 1 (th Cir. )... Indep. Living Ctr. of S. California, Inc. v. Maxwell-Jolly F.d (th Cir. 00)... In re Innovatio IP Ventures, LLC Patent Litig. 01 WL 0 (N.D. Ill. Oct., 01)... 1, Jews For Jesus v. Brodsky F. Supp. (D.N.J. )... Mahroom v. Best Western Int l., Inc. No. C 0 1 JF (HRL), 00 WL (N.D. Cal. Feb., 00)... Microsoft Corp. v. Motorola, Inc. F.d (th Cir. 01)..., Microsoft Corp. v. Motorola, Inc. No. C-JLR, 01 WL 1 (W.D. Wash. Apr., 01)... 1, Powell v. McCormack U.S. ()... 1 Rackwise v. Archbold No. - WBS CKD, 0 WL 00, at * (E.D. Cal. June 1, 0)... 1 Realtek Semiconductor Corp., No. C-1-1-RMW, 01 WL (N.D. Cal. June, 01)... -iii-

5 Realtek Semiconductor Corp. v. LSI Corp. F. Supp. d (N.D. Cal. 01)... 1 Regents of Univ. of California v. Am. Broad. Cos., Inc. F.d (th Cir. )... Rent-A-Center, Inc. v. Canyon Television & Appliance Rental, Inc. F.d (th Cir. 1)... 1 Research in Motion Ltd. v. Motorola, Inc. F. Supp. d (N.D. Tex. 00)... Signal Hill Serv., Inc. v. Macquarie Bank Ltd. No. CV -01 MMM, 0 WL 0 (C.D. Cal. June, 0)... Stuhlbarg Int l Sales Co. v. John D. Brush & Co. 0 F.d (th Cir. 001)... 1, 1 TCL Commc n Tech. Holdings v. Telefonaktiebolaget Lm Erricsson No: SACV 1-1 JVS(DFMx), 0 WL 1, at * (C.D. Cal. Dec. 1, 0)... 1, 1,,, Textile Unlimited, Inc. v. A. BMH and Co. 0 F.d 1 (th Cir. 001)... 1 Federal: Statutes, Rules, Regulations, Constitutional Provisions U.S.C Fed. R. Civ. P. (b)... 1 Fed. R. Civ. P. (c)... Sherman Act, 1 U.S.C.... -iv-

6 Plaintiffs u-blox AG, u-blox San Diego, Inc., and u-blox America, Inc. (collectively, Plaintiffs or u-blox ) respectfully request that this Court immediately grant u-blox s motion for a Temporary Restraining Order ( TRO ) against InterDigital, Inc., InterDigital Communications, Inc., InterDigital Technology Corporation, InterDigital Patent Holdings, Inc., InterDigital Holdings, Inc., and IPR Licensing, Inc. (collectively, InterDigital or Defendants ) to protect its client relationships pending a hearing to show cause why a preliminary injunction should not issue in this case. I. INTRODUCTION u-blox filed this action to obtain the court s assistance in obtaining a fair, reasonable and non-discriminatory ( FRAND ) license to InterDigital s G, G, and G standard essential patent ( SEP ) portfolio. u-blox seeks this TRO to prevent InterDigital from irreparably interfering with u-blox s customer relationships in an attempt to force it to accept license terms and conditions that are not FRAND. There is no dispute that InterDigital must provide a FRAND license to u-blox. u- blox requests a TRO merely to keep the status quo between the parties while this court determines the FRAND terms for such a license. This relief is required because InterDigital has threatened and interfered with u-blox s customer relationships in the past, forcing u-blox to vastly and unlawfully overpay for a license to InterDigital s SEP portfolio. Now, without a current license, u-blox s business and customer relationships are again at risk. The Court should not allow InterDigital to engage in such strong-arm tactics in order to extract hold-up value from its SEP portfolio. By way of background, InterDigital repeatedly contracted with the European Telecommunications Standards Institute ( ETSI ), a technology standard setting organization ( SSO ), that if InterDigital s alleged SEPs were adopted and incorporated into the G, G, and G telecommunications standards, InterDigital would license those patent to implementers of the standards, such as u-blox, on -1-

7 FRAND terms. u-blox is a third-party beneficiary of this contract and is ready and willing to enter into a license with InterDigital, but the parties are unable to agree on the terms. Thus, u-blox filed its Complaint seeking a declaratory judgment to, inter alia, set the FRAND terms and conditions, including, but not limited to, the FRAND royalty rate for a license to InterDigital s G, G, and G SEPs. As other courts have done when the parties cannot come to an agreement, the FRAND terms and rates will be decided by the Court in this action. InterDigital has no incentive to negotiate FRAND terms because in the past it has been able to force u-blox into license extension agreements that required u-blox to continue paying the existing exorbitant non-frand rates. InterDigital is thus able to hold u-blox hostage by threatening its customers when the existing license agreement expires. More recently, in a blatant attempt to force u-blox to capitulate and sign a new patent license on non-frand terms, InterDigital has refused to refrain from contacting u-blox s customers and downstream manufacturers. InterDigital s strategy is to InterDigital s conduct is egregious because InterDigital is well aware that: (i) u-blox s customers and downstream manufacturers determined. and (ii) u-blox is a ready and willing licensee once a FRAND rate is In addition, as explained herein and in detail in the supporting u-blox Declarations, 1 InterDigital s threats to u-blox s customers and their downstream manufacturers not only threaten to profoundly impact u-blox s critical customer 1 See Declaration of Andreas Thiel ( Thiel Decl. ), Declaration of Kent Baker ( Baker Decl. ) and Declaration of Mark Murray ( Murray Decl. ) (collectively, the Declarations ). --

8 relationships, but u-blox s Indeed, u-blox has been a licensee of InterDigital s alleged SEPs since 0 and relied on InterDigital s FRAND commitment to invest significant resources to develop products that practice the G, G, and G cellular standards, all of which will be lost if InterDigital is permitted to threaten u-blox s customers and their downstream manufacturers. Indeed, u-blox s customers are building products that they plan to sell for many years, and those customers therefore rely upon and need to have confidence that their critical component suppliers, such as u-blox, will continue to be licensed and around long into the future. As such, not only would u-blox s significant investments in its technology, business, and customers be lost without any opportunity for recoupment, but the loss of u-blox customers would be devastating to u-blox, as the goodwill, image and reputation that u-blox has built up with its customers and in the industry over many years will be gone forever. Leveraging and interfering with u-blox s customers in order to force u-blox to pay greatly inflated royalties is the definition of patent hold-up and should not be permitted. Unfortunately, this is not the first time that InterDigital has used these strongarm tactics against u-blox in order to coerce it to entering a patent license agreement on non-frand terms. In 0, upon the expiration of a prior patent license agreement between the parties, InterDigital immediately contacted and threatened u- blox s customers and downstream manufacturers,. These tactics are outrageous and highly improper. Indeed, InterDigital knew that: (i) u-blox entered into relationships with its customers in reliance on InterDigital s commitment to offer a FRAND license, and (ii) u-blox s customers and their downstream manufacturers relied on u-blox to maintain its license with InterDigital to design and incorporate u-blox s technology into their products. Because InterDigital s threats to u-blox s customers would have caused extreme detriment to u-blox s critical --

9 customer relationships, u-blox had no choice but to capitulate and sign a temporary patent license agreement with InterDigital that included royalty payments far in excess of what could be considered fair or reasonable. The term of u-blox s temporary license from InterDigital expired on December 1, 0. u-blox is again ready and willing to enter into a new patent license with InterDigital on FRAND terms. However, InterDigital is refusing to refrain from repeating the tactics that it employed in 0, including unnecessarily contacting u-blox s customers and downstream manufacturers, In sum, because the FRAND rate will be decided by this Court and u-blox will be an InterDigital licensee, there is no legitimate reason for InterDigital to contact u-blox s customers during the pendency of this action with respect to u- blox s products. Accordingly, u-blox submits this request for a TRO and preliminary injunction to enjoin InterDigital, during the pendency of this action, or until the parties otherwise agree on the FRAND terms of a patent license between them, from contacting u-blox s customers and downstream manufacturers, demanding royalty payments from them for products incorporating u-blox technology, or otherwise disrupting or interfering with u-blox s relationships with its customers and downstream manufacturers. II. FACTUAL BACKGROUND A. Standard Setting Organizations and ETSI s IPR Policy Standard setting organizations ( SSOs ) are voluntary membership organizations whose participants engage in the development of industry standards for the benefit of their members, affiliates, and third parties implementing the standards. SSOs and the standards they promulgate play an important role in the --

10 technology market, because SSOs allow companies to agree on common technology standards so that compliant products implementing the standards will work together. Standards also deliver economic benefits to innovators, firms that implement the standards, and consumers who benefit from continued innovation, reduced costs, and other efficiencies from widespread interoperability and economies of scale and scope enabled by the standard. Standards can also potentially impose excessive and unfair costs on these same constituencies when owners of patents that cover or are declared to cover various technologies necessary to practice a standard engage in opportunistic behavior. Therefore, in order to prevent SEP owners from unfairly exploiting alleged SEPs, SSOs have adopted intellectual property rights ( IPR ) policies. The IPR policies permit standard setting participants the opportunity to have their technology incorporated into a standard and to receive compensation for its use in a larger number of devices that operate using the standard in exchange for agreeing to license any such SEP on fair, reasonable, and non-discriminatory ( FRAND ) terms. Firms that implement the standard thus receive assurance that they will always have access to the standard-essential patents and will not be exploited by patent holders or disadvantaged relative to other implementers if they invest in implementing the standard or developing innovative products that may operate with the standard. For example, the IPR Policy of the SSO European Telecommunications Standards Institute ( ETSI ) requires that if an ETSI member owns IPR, including patents that may be considered essential to a particular standard or technical specification, the owner must grant irrevocable licenses on FRAND terms and --

11 conditions to anyone practicing the standard in return for inclusion of such IPR into the standard. Clause.1 of ETSI s IPR Policy provides: A. When an ESSENTIAL IPR relating to a particular STANDARD or TECHNICAL SPECIFICATION is brought to the attention of ETSI, the Director-General of ETSI shall immediately request the owner to give within three months an irrevocable undertaking in writing that it is prepared to grant irrevocable licences on fair, reasonable and non-discriminatory [FRAND] terms and conditions under such IPR The above undertaking may be made subject to the condition that those who seek licences agree to reciprocate. ETSI IPR Policy,.1. As an ETSI member, in conjunction with the adoption of the G, G, and G standards, InterDigital made submissions to the technical bodies within ETSI, declaring that certain of its patents or patent applications may be or may become essential to the mobile device standards under consideration. InterDigital also repeatedly represented that it was committed to license any such essential patents it held on FRAND terms and conditions. True and Correct copies of InterDigital s declarations to ETSI are attached to u-blox s Complaint as Exhibits 1 through. In sum, because InterDigital declared a number of its patents to be essential to the G, G, and/or G cellular standards established by ETSI and implemented worldwide in a variety of wireless electronic devices, consistent with ETSI s IPR Policy, InterDigital agreed that it would license any such SEPs to implementers of the technology standard on FRAND terms, including to u-blox. Id. B. In Reliance on InterDigital s FRAND Obligations and Commitments, u-blox Becomes an InterDigital Licensee u-blox delivers wireless technology to reliably locate and connect people and devices. u-blox is a leading developer of global positioning technology, including ETSI s IPR Policy is available at --

12 products and services based on Global Navigation Satellite Systems (GNSS), including GPS and GALILEO, for the automotive, mobile communications, and infrastructure markets. u-blox develops cellular modules incorporating a variety of different cellular technologies, including those that provide global geographic coverage such as the G, G, and G standards. See Thiel Decl. at. terms, In reliance on InterDigital s promise to license its alleged SEPs on FRAND See Thiel Decl. at 0 1. In addition,. Id. at 1. As explained above, InterDigital is required to license its declared SEPs to u- blox consistent with InterDigital s commitments to ETSI and participants and implementers of the technology standards. However, as explained below, InterDigital is refusing to license its declared essential patents to u-blox on FRAND terms and conditions. C. To Coerce u-blox to Sign a Non-FRAND Agreement, InterDigital Interfered with u-blox s Customer Relationships Baker Decl. at. There are a number of reasons why the royalty rates u-blox is paying are not FRAND, including that the rates cannot be supported by any reasonable top-down --

13 analysis, which has become a well adopted method for valuing SEPs. Additionally, patent royalty rates decline over time. Baker Decl. at. Accordingly, See id. at. However, despite the fact that such true-ups are commonly agreed to by patent owners in order to allow licensees to negotiate without the licensee being unfairly locked into paying non-frand rates, Id. at. In addition, but in a blatant attempt to coerce u-blox to agree to pay excessive non-frand rates, InterDigital immediately reached out to u-blox s customers and downstream manufacturers, informing them that. See Baker Decl. at. InterDigital s conduct was unnecessarily destructive and outrageous, because InterDigital knew that: (i) u-blox s customers and downstream manufacturers would, and (ii) u-blox was ready and willing to enter into a license with InterDigital once a FRAND rate was agreed upon. As such, there was no legitimate reason why InterDigital would reach out to u-blox s customers or downstream manufacturers to discuss u-blox. Nonetheless, InterDigital refused to provide a FRAND license to u-blox and then, in order to force u-blox into a license that was not on FRAND terms, InterDigital reached out to important u-blox customers and downstream manufacturers including, at a minimum,. See Murray Decl. at 1. Not surprisingly, --

14 u-blox s customers and/or downstream manufacturers were extremely concerned. Id. at. InterDigital was now in a position to that incorporate the G, G and G standard. Indeed, those u-blox customers and downstream manufacturers had relied on u- blox s representation that it was licensed by InterDigital to design, incorporate, and/or manufacture products containing a u-blox component products that take years to design and manufacture. See Baker Decl. at 0. But, now, after having relied on u-blox s representation that it was licensed by InterDigital to design, incorporate, and/or manufacture products containing a u-blox component, u-blox s customers and downstream manufacturers found themselves at risk of In addition, u-blox s customers and those customers manufacturers and end users particularly in the automotive and industrial markets are building products they plan to sell for many years. These customers and manufacturers need confidence that their suppliers, such as u-blox, will be around and able to supply modules long into the future. But, InterDigital was now causing u-blox s customers to question u-blox s credibility and reliability, and to lose their trust in u-blox. Baker Decl. at. It was clear to u-blox that the only reason why InterDigital continued to demand non-frand rates from u-blox while threatening u-blox s customer relationships was to force u-blox to agree to a license extension based on excessive royalty payments and non-frand terms. u-blox faced a dilemma refuse the unfair license terms and lose its clients and business or continue to negotiate the license while paying the exorbitant (i.e., non-frand) rates. u-blox could not risk losing its customers, goodwill, and reputation. Therefore, See Baker Decl. at, Exhibit B. --

15 D. In addition, because, as discussed above, the rates that u-blox was paying were not FRAND rates, Id. at. Id. at. --

16 In other words, despite u-blox committing to accepting a license on FRAND terms, Id. at. As such, and in order to limit the time when u-blox would continue to be forced to pay royalties that were not FRAND, Id. at. Id. at. Id. at 0. On December 1, 0, --

17 Id. at 1. E. InterDigital Must Be Enjoined From Threatening u-blox s Customer Relationships to the Extreme Detriment of u-blox u-blox is ready and willing to enter into a new patent license with InterDigital on FRAND terms, and those terms will now be decided by this Court in this action. Therefore, there is no legitimate reason for InterDigital to contact u-blox s customers or downstream manufacturers claiming that u-blox is unlicensed. The only reason why InterDigital needs to do so would be to threaten u-blox s customer relationship to force u-blox to once again sign a license agreement that is not on FRAND terms. Nonetheless, InterDigital is refusing to refrain from this conduct that it employed successfully in 0. As a result, u-blox respectfully requests that a TRO issue and an Order to Show Cause why a Preliminary Injunction should not issue prohibiting InterDigital during the pendency of this action or until a FRAND rate is otherwise determined from contacting u-blox s customers and downstream manufacturers, demanding royalty payments from them for products incorporating u-blox technology, or otherwise disrupting or interfering with u-blox s relationships with its customers and downstream manufacturers. III. ARGUMENT A. Applicable Legal Standards A temporary restraining order ( TRO ) is a form of preliminary injunctive relief that can be issued with or without notice to the opposing party or that party s attorney. See Fed. R. Civ. P. Rule (b). Its sole purpose is to prevent irreparable harm from occurring by preserving the status quo pending a hearing on the moving party s application for a preliminary injunction. See Granny Goose Foods, Inc. v. -1-

18 Brotherhood of Teamsters & Auto Truck Drivers, 1 U.S., (); Textile Unlimited, Inc. v. A. BMH and Co., 0 F.d 1, (th Cir. 001) ( A preliminary injunction is not a preliminary adjudication on the merits, but a device for preserving the status quo and preventing the irreparable loss of rights before judgment. ). The standard for issuing a TRO is the same as the standard for issuing a preliminary injunction. See Stuhlbarg Int l Sales Co. v. John D. Brush & Co., 0 F.d, -0 & n. (th Cir. 001). To obtain a TRO, a movant must establish that he is likely to succeed on the merits, that he is likely to suffer irreparable harm in the absence of preliminary relief, that the balance of equities tips in his favor, and that an injunction is in the public interest. Henry Schein, Inc. v. Cook, 1 F. Supp. d, (N.D. Cal. 0). These factors are balanced against one another, such that a strong showing of irreparable harm may overcome a lesser showing of likelihood of success, and likewise a strong showing on the merits justifies preserving the status quo even in cases with less substantial irreparable harm. See Alliance for the Wild Rockies v. Cottrell, F.d 1, - (th Cir. 0) ( A preliminary injunction is appropriate when a plaintiff demonstrates that serious questions going to the merits were raised and the balance of hardships tips sharply in the plaintiff's favor. ). B. A TRO And Preliminary Injunction Should Be Granted 1. u-blox is Likely to Succeed on the Merits of its Claims A plaintiff need only show success on the merits is likely for one claim, not all claims to meet the burden of establishing an entitlement to a preliminary injunction. C & C Props. v. Shell Co., No. 1:1-CV-0-JAM-JLT, 01 WL -1-

19 , at * (E.D. Cal. Sept., 01), report and recommendation adopted (Dec., 01). Here, u-blox is likely to succeed on the merits of several claims. a. u-blox is Likely to Succeed on Its Declaratory Relief Claim The Declaratory Judgment Act allows a federal court to declare the rights and other legal relations of parties to a case of actual controversy. U.S.C. 01 (0); C & C Props., 01 WL 0, at *. The availability of declaratory relief depends on whether there is a live dispute between the parties, and a request for declaratory relief may be considered independently of whether other forms of relief are appropriate. TCL Commc n Tech. Holdings v. Telefonaktiebolaget Lm Ericsson, No: SACV 1-1 JVS(DFMx), 0 WL 1, at * (C.D. Cal. Dec. 1, 0) (citing Powell v. McCormack, U.S., - ()). In the Ninth Circuit, [d]eclaratory relief is appropriate (1) when the judgment will serve a useful purpose in clarifying and settling the legal relations in issue, and () when it will terminate and afford relief from the uncertainty, insecurity, and controversy giving rise to the proceeding. Eureka Fed. Sav. & Loan Ass n v. Am. Cas. Co., F.d, 1 (th Cir. ). Here, as detailed in Plaintiffs Complaint and u-blox s Declarations, a justiciable controversy exists between u-blox and InterDigital regarding what constitutes FRAND terms and conditions for a license to InterDigital s alleged G, G, and G SEPs with respect to u-blox s products. As such, as other courts have done when the parties cannot agree on FRAND terms, this Court will resolve the parties dispute by issuing a judgment that sets the applicable FRAND terms and conditions, including the royalty rate(s), for a license u-blox is likely to succeed on the merits of each of its claims, but since it is only required to succeed with respect to one for purposes of an injunction, u-blox does not address the merits of each of its claims. -1-

20 to InterDigital s alleged G, G, and G SEPs. See, e.g., TCL Commc n Tech. Holdings, 0 WL 1, at *1-, *- (entering judgment determining the FRAND rate); In re Innovatio IP Ventures, LLC Patent Litig., No. C 0, 01 WL 0, at * (N.D. Ill. Oct., 01) (determining FRAND rate); Microsoft Corp. v. Motorola, Inc., No. C-JLR, 01 WL 1, at *0 (W.D. Wash. Apr., 01) (determining FRAND rate). In fact, it is virtually a certainty that this Court will determine the applicable FRAND rate in this action. See TCL Commc n Tech. Holdings., 0 WL 1, at * ( It is unnecessary for the Court to determine whether the failure to arrive at an agreed FRAND rate violated Ericsson s FRAND obligation. Regardless of the answer to that question, the Court is required to assess whether FRAND rates have been offered in light of the declaratory relief which both sides seek. ). Based on the foregoing, u-blox is likely to succeed on its claim seeking a declaratory judgment that sets the FRAND terms and conditions. b. u-blox is Likely to Succeed on Its Breach of Contract Claim A cause of action for breach of contract requires proof of: (1) existence of the contract; () plaintiff s performance or excuse for nonperformance; () defendant s breach; and () damages to plaintiff as a result of the breach. Blizzard Entm t, Inc. v. Ceiling Fan Software LLC, F. Supp. d 0, (C.D. Cal. 01). In addition, when the plaintiff has shown that it is likely to succeed on the merits of a substantive claim, courts have found that the plaintiff is likely to succeed in obtaining a related determination of the rights and interests of the parties. See C & C Props., 01 WL 0, at * (finding that plaintiffs were likely to succeed on its declaratory judgment claim when plaintiffs also established a trespass claim). Here, u-blox is likely to succeed on its declaratory judgment claim because, as set forth below, u-blox is also likely to succeed on the merits of its underlying breach of contract claim based on InterDigital s failure to negotiate in good faith for a FRAND license. -1-

21 Here, InterDigital entered into contractual commitments with ETSI and their respective members, participants, and implementers relating to the G, G, and G standards. As a member of ETSI and to comply with ETSI s IPR Policy, InterDigital made a binding commitment to ETSI, ETSI members, and implementers of the standard, such as u-blox, to grant irrevocable licenses to InterDigital s alleged SEPs on FRAND terms and conditions if its alleged SEPs were incorporated into the technology standards. u-blox stands willing to enter into a license with InterDigital on terms that are FRAND. However, in breach of InterDigital s contract with ETSI, InterDigital is attempting to extract from u-blox supra-competitive royalties which are not on FRAND terms. See Baker Decl. at 0 1. Among other things, Id. at 1. In addition, a study conducted by Concur IP as part of unrelated litigation, See Complaint 1-. Compare to TCL where the Court used a total royalty stack of between only -% for a license to all G SEPs. TCL Commc n Tech. Holdings, 0 WL 1, at * As explained above, there is no legitimate reason for Interdigital to contact u-blox s customers or downstream manufacturers because u-blox is willing and committed in good faith to finalize a new PLA. --

22 A number of cases that have been litigated in U.S. courts demonstrate that patent hold-up is a widespread problem, with SEP owners violating their FRAND commitments by making royalty demands significantly above the adjudicated FRAND rates. See, e.g., TCL Commc n Tech. Holdings., 0 WL 1, at *1- (determining FRAND rates of 0.1%-0.% for G, 0.%-0.0% for G, and 0.0%-0.% for G, as compared to Ericsson s demand of 1.% for G, 1.% for G, and 0.%-1.0% for G); In re Innovatio, 01 WL 0, at * (for asserted patents, assessing damages of $0.0 per unit as compared to the proposed royalty of $. per unit for tablet computers); Microsoft Corp. v. Motorola, Inc., 01 WL 1, at *0 (determining, FRAND rate of $0.01 per Microsoft s xbox unit, as compared to Motorola s initial demand of $.00-$.00 per xbox unit). In every case, the SEP owner demanded royalty payments that were multiple times in excess of what was FRAND. This is precisely what is occurring here. InterDigital is refusing to offer u- blox a license on FRAND terms, and is continuing to take actions, like it did in 0, to force u-blox to enter into a non-frand license. Without a FRAND license from InterDigital, not only will u-blox suffer significant monetary harm, but as explained below, u-blox will suffer a loss of its customers, its goodwill, product image, and reputation. Based on the foregoing, u-blox is more than likely to succeed on its breach of contract claim. See Microsoft Corp. v. Motorola, Inc., F.d, (th Cir. 01) ( the jury could conclude that Motorola's actions were intended to induce hold-up, i.e., to pressure Microsoft into accepting a higher RAND rate than was objectively merited, and thereby to frustrate the purpose of the contract. ). c. u-blox is Likely to Succeed on Its Antitrust Claim u-blox asserts an antitrust monopolization claim under the Sherman Act, 1 U.S.C., based on InterDigital s alleged abusive licensing practices and unlawful monopolization in certain relevant markets for G, G, and G cellular --

23 technologies. As alleged in detail in u-blox s Complaint and described above, InterDigital has engaged in an unlawful scheme to exploit its undue market power over technologies necessary for implementers, including u-blox, to practice the G, G, and G standards. InterDigital s market power is due solely to its false commitments to license its alleged SEPs on FRAND terms and conditions, which locked in its technology into the standard(s). However, after acquiring an unlawful monopoly over the relevant technology markets, InterDigital has illegally exploited this power against u-blox by refusing to honor its obligation to license its alleged SEPs on FRAND terms and conditions and threatening u-blox s customers relationships to further its monopolistic scheme. InterDigital s actions injure competition by excluding alternate technologies which could have been included in the standard and then forcing implementers of the standards such as u-blox to face drastically higher costs for access to cellular technologies necessary for the manufacture of standard-compliant products. InterDigital s attempt to extract monopoly rates that are not FRAND from u-blox, including, for example,, see Baker Decl. at, is precisely the type of patent hold-up that patent policies of SSOs were designed to eliminate. See Research in Motion Ltd. v. Motorola, Inc., F. Supp. d, 1, (N.D. Tex. 00); see also Image Tech. Servs., Inc. v. Eastman Kodak Co., 1 F.d 1, 1 (th Cir. ) ( the right of exclusion [does not] protect an attempt to extend a lawful monopoly beyond the grant of a patent ); Broadcom Corp. v. Qualcomm Inc., 01 F.d, 1 (d Cir. 00) (explaining the unique dangers of deception in the standard- setting context where participants rely on structural protections, such as rules requiring the disclosure of [intellectual property rights], to facilitate competition and constrain the exercise of monopoly power ). Accordingly, u-blox is likely to succeed on the merits of its antitrust claim. --

24 C. u-blox Will Suffer Irreparable Harm Absent A TRO And Preliminary Injunction 1. InterDigital s Conduct Will Irreparably Harm u-blox s Goodwill and Reputation As explained in detail in the Declarations of u-blox s representatives, if, prior to this Court determining the FRAND rate for u-blox s license to InterDigital s patents, InterDigital is permitted to contact u-blox s customers and downstream manufacturers and relationships will be profoundly harmed and the, u-blox s customer Indeed, as explained above, when InterDigital contacted u-blox s customers and downstream manufacturers in 0, stating that (even though the real reason why InterDigital was doing so was to pressure u-blox to accept InterDigital s non-frand rate), u- blox s customers and their downstream manufacturers were confused and, not surprisingly, extremely concerned. See Murray Decl. at 1. Indeed, having relied on u-blox s representation that it was licensed by InterDigital to design, incorporate, and/or manufacture products containing a u-blox component that takes years to design and manufacture, these customers and downstream manufacturers were suddenly at risk of Id. at ( u-blox is the licensee of InterDigital, but now InterDigital said u-blox is not in the license list. If that is true, we will have a big issue. ). u-blox was extremely worried because InterDigital was causing u-blox s customers to question u-blox s credibility and lose their trust in u-blox. Id. at ( if InterDigital continued to state to, it would not only kill u-blox s business with its customers, but, as explained below, would --

25 cause u-blox irreversible harm. ). u-blox could not risk losing its customers, and ultimately its business. Therefore,. See Baker Decl. at. The impact on u-blox if InterDigital is permitted to again contact u-blox s customers and downstream manufacturers claiming, again, that would be devastating to u-blox. See Thiel Decl. at -; see also Murray Decl. at. Indeed, among other things, in reliance upon InterDigital s promises that it would license its technology to u-blox and others on FRAND terms, u-blox has made significant investments into the research, development, and production of its cellular modules, and has committed to its customers a product roadmap based on cellular technology reaching beyond 00. See Thiel Decl. at 0-. Similarly, u-blox s customers particularly in the automotive and industrial markets are building products that they plan to sell for many years, and those customers therefore rely upon and need to have confidence that their critical component suppliers, such as u-blox, will continue to be licensed and around long into the future. See Thiel Decl. at. As such, not only would the significant investments by u-blox in its technology, business, and customers essentially be lost without any opportunity for recoupment, see Thiel Decl. at, but the loss of u-blox customers would be devastating to u-blox, as the goodwill, image and reputation that u-blox has built up with its customers and in the industry over many years will be gone forever. See Thiel Decl. at 0. u-blox s customers would also be facing after spending significant time and money to design their products around u-blox s technology. In addition, u-blox s customers and -0-

26 downstream manufacturers will lose credibility in u-blox, destroy u-blox s goodwill and reputation and, ultimately, its customers. See Thiel Decl. at 1 ( [i]f, after all of these efforts a u-blox customer is left with an unsaleable product, the goodwill and trust that u-blox has obtained with many years of hard work will inevitably be destroyed. ) Evidence of threatened loss of prospective customers or goodwill certainly supports a finding of the possibility of irreparable harm. Stuhlbarg Int l. Sales Co., 0 F.d at 1; see also Rent-A-Center, Inc. v. Canyon Television & Appliance Rental, Inc., F.d, 0 (th Cir. 1) (damage to goodwill may support a finding of irreparable harm because it is difficult to quantify); Rackwise v. Archbold, No. - WBS CKD, 0 WL 00, at * (E.D. Cal. June 1, 0) (granting plaintiff s motion for preliminary injunction when defendant s conduct would harm the reputation and goodwill of plaintiff with investors, customers, and the SEC. ); Realtek Semiconductor Corp. v. LSI Corp., F. Supp. d, 0 (N.D. Cal. 01) (granting plaintiff s motion for a preliminary injunction to enjoin defendant from enforcing an exclusion order when it harmed [plaintiff s] reputation and poses an imminent threat of customer and revenue loss. ); Foremost Grps. Inc. v. Ayers Bath USA Corp., Case No. CV -0 GAF (Ex), 0 WL 1, at * (C.D. Cal. Dec. 0, 0) (granting plaintiff s request to enjoin defendant from selling parts and products because the court found it likely that such conduct would impair plaintiff s ability to maintain business relationships with its customers and develop business with others). It will be impossible for u-blox to recover from the harm to its goodwill and business reputation. See Thiel Decl. at ( [I]t would be impossible for u-blox to recover the goodwill and reputation that u-blox has built up over so many years. ). Blindlight, LLC v. Cubbison, No. LA CV-0 JAK (PLAx), 0 WL 0, at *1 (C.D. Cal. July, 0), is instructive. In Blindlight, the court found that potential harm to a plaintiff s business reputation was irreparable because -1-

27 plaintiff s clients were confused and concerned by the abrupt change in plaintiff s service after the plaintiff and defendant subcontractor were unable to reach an agreement. Id. at *1. This is precisely what occurred here in 0 before u-blox was forced to give up its rights and accept a non-frand license. See Murray Decl. at 1 (explaining that u-blox s clients expressed serious concerns and confusion when InterDigital began communicating with them stating that u-blox was not licensed by InterDigital). Here, as in Blindlight, InterDigital s actions are likely to harm Plaintiff s goodwill with both particular clients and in the general marketplace. Blindlight, 0 WL 0, at *1. Because the loss of goodwill is not easily quantified, it supports a showing of irreparable harm. Id.. The Harm to u-blox While monetary harm generally will not support a request for injunctive relief, it is well-settled that monetary harm can rise to the level of irreparable harm when a monetary remedy would be inadequate, such as when there is a threat to the very existence of a business. Regents of Univ. of California v. Am. Broad. Cos., Inc., F.d, n. (th Cir. ) ( threat to business existence is an exception to the rule that monetary damages do not constitute irreparable harm). Here, InterDigital s refusal to refrain from contacting u-blox customers in order to put pressure on u-blox See Thiel Decl. at Thus, InterDigital s conduct support[s] a finding of irreparable harm. Signal Hill Serv., Inc. v. Macquarie Bank Ltd., No. CV -01 MMM (JEMX), 0 WL 0, at * (C.D. Cal. June, 0) ( Courts within the Ninth Circuit have also recognized that the major disruption of a business or termination thereof can constitute irreparable injury. ); see also Auntie Anne s, Inc. v. Wang, No. CV 1-0 MMM (Ex), 01 WL 1, at * (C.D. Cal. --

28 July, 01); Mahroom v. Best Western Int l., Inc., No. C 0 1 JF (HRL), 00 WL, at * (N.D. Cal. Feb., 00). Indeed, InterDigital s wrongful interference has put u-blox s business. See Thiel Decl. at (stating that if InterDigital is permitted to contact u-blox s customers stating that ; see also Baker Decl. at ( InterDigital s threats to u-blox s customers and downstream manufacturers ); Murray Decl. at (u-blox s harm would be such that u-blox would be unable to recover ); id. at 0 ( if, under these circumstances, u-blox loses a design to a competitor and/or u-blox s customer finds another supplier and transfers its goodwill to that supplier, it will be extremely difficult, if not impossible, to unwind that relationship and get that customer to return to u-blox ). Based on the foregoing, if a TRO is not granted prohibiting InterDigital from contacting u-blox s customers and downstream manufactures claiming that u-blox is not licensed, u-blox will be irreparably harmed. D. The Equities Weigh Heavily in u-blox s Favor The Court must also consider and balance the competing claims of injury and must consider the effect on each party of the granting or withholding of the requested relief. Extreme Reach v. Spotgenie Partners, No. CV 1-0-DMG (JCGx), 01 WL 1, at * (C.D. Cal. Nov., 01). Here, the equities strongly favor u-blox. Here, on the one hand, u-blox is willing to enter into a license agreement with InterDigital as long as the rate is FRAND. See Baker Decl. at. As such, and because the parties are in disagreement as to what the FRAND rate is, u-blox brought this action so that the Court may adjudicate the issue. Once the FRAND rate is determined by this Court (subject, of course, to any potential appeals), u-blox --

29 will pay the FRAND rate to InterDigital, as the parties did in TCL Commc ns Tech. Holdings. See 0 WL 1, at *. u-blox will therefore ultimately have an InterDigital license,. On the other hand, there is no legitimate reason why InterDigital would reach out to u-blox s customers or downstream manufacturers while this litigation is pending. To the contrary, the only reason why InterDigital would interfere with u- blox s customers would be to apply wrongful pressure on and hold-up u-blox to force it to accept a non-frand license. See Microsoft, F.d at (upholding a jury verdict finding that Motorola breached its good faith and fair dealing obligations when Motorola intended to induce hold-up, i.e., to pressure Microsoft into accepting higher RAND rate than was objectively merited). As explained above, if InterDigital is not enjoined pending the outcome of this litigation and determination of a FRAND rate, u-blox is at risk of losing its market goodwill, losing its key clients, suffering financial loss In sharp contrast, InterDigital will not suffer any injury if InterDigital is enjoined, because InterDigital will be paid the FRAND rate once it is established by this Court. See, e.g., Realtek Semiconductor, Corp., No. C- 1-1-RMW, 01 WL, at * (N.D. Cal. June, 01) (setting a FRAND rate as part of final judgement). In sum, the equities strongly favor u-blox. See, e.g., Huawei Techs., Co. v. Samsung Elecs. Co., No. :-cv-0-who, 0 WL 0, at * (N.D. Cal. Apr. 1, 0) ( the Shenzhen Order interfere[s] with equitable considerations by compromising the court s ability to reach a just result in the case before it free of external pressure on [Samsung] to enter into a holdup settlement before the litigation is complete. ). E. A Preliminary Injunction is in the Public Interest Finally, the public interest factor weighs heavily in favor of u-blox as well. This factor requires the Court to consider whether there exists some critical public --

30 interest that would be injured by the grant of preliminary relief. Indep. Living Ctr. of S. California, Inc. v. Maxwell-Jolly, F.d, (th Cir. 00). Where a party demonstrates both the likelihood of success on the merits and irreparable injury, it almost always will be the case that the public interest will favor the issuance of an injunction. Jews For Jesus v. Brodsky, F. Supp., 1 (D.N.J. ). Here, the public has an interest in seeing companies like InterDigital, that own SEPs, comply with their obligations to offer licenses to alleged SEPs at fair rates. See Broadcom Corp., 01 F.d at 0 1 (explaining how industry standardsetting can enhance consumer welfare by increasing competition, preventing patent hold-up, and reducing costs); Certified Restoration Dry Cleaning Network v. Tenke Corp., F.d, 1 (th Cir. 00) (granting injunction based on the general public interest in the enforcement of voluntarily assumed contract obligations ). The public also has an interest to see technology companies and manufacturers design and innovate products, but InterDigital s interference with u-blox s customer relationships, and prospective customer relationships, will disrupt the supply chain. The issuance of this injunction will thus allow u-blox to pursue a FRAND rate, without the disruption of its relationships with customers and its business. It will also prevent u-blox from being wrongfully pressured into an unfair and non- FRAND license. In sum, the public interest will be served by the injunctive relief and therefore, u-blox s request for relief should be granted. IV. u-blox Should Not Be Required To Post a Bond For purposes of the security requirement under Federal Rule of Civil Procedure (c), u-blox submits that, in light of the high likelihood that u-blox will prevail in this action, the fact that the balance of equities sharply favors u-blox, and because InterDigital s interests will not be impacted if an injunction issues, u-blox should not be required to post a security at all. See California v. Tahoe Reg l --

31 Planning Agency, F.d 1, (th Cir. ) ( the likelihood of success on the merits... tips in favor of a minimal bond or no bond ). V. CONCLUSION For the foregoing reasons, u-blox respectfully requests that a TRO issue and an Order to Show Cause on why a Preliminary Injunction should not issue, prohibiting InterDigital during the pendency of this action or until a FRAND rate is otherwise determined from contacting u-blox s customers and downstream manufacturers, demanding royalty payments from them for products incorporating u-blox technology, or otherwise disrupting or interfering with u-blox s relationships with its customers and downstream manufacturers. Dated: January 1, 0 SHEPPARD, MULLIN, RICHTER & HAMPTON LLP By /s/ Stephen S. Korniczky STEPHEN S. KORNICZKY MARTIN R. BADER MATTHEW W. HOLDER DANIEL L. BROWN RYAN P. CUNNINGHAM Attorneys for Plaintiffs --