# No Injury, No Antitrust Case: Continental v. Avanci and the Auto Supplier Locked Out of SEP Licenses

> The Fifth Circuit held that a component supplier denied direct licenses to cellular standard-essential patents suffered no cognizable injury, dooming its FRAND-based antitrust claims against the Avanci pool.

Topic: Patents  |  Author: Lidiia Levitska  |  Source: Intellectual Property Law (outsideipcounsel.com)
Canonical: https://outsideipcounsel.com/blog/continental-v-avanci-sep-frand-antitrust-standing/


When carmakers add cellular connectivity, the patents behind 4G belong to a thicket of owners — and a licensing pool called Avanci offers automakers one-stop access. But what about the supplier that builds the connectivity module and wants its own license? In *Continental Automotive Systems, Inc. v. Avanci, LLC*, 27 F.4th 326 (5th Cir. 2022), the Fifth Circuit gave a discouraging answer. The published per curiam opinion, issued February 28, 2022 by a panel of Judges Carl Stewart, James Ho, and Kurt Engelhardt, held that an auto-parts supplier denied direct licenses to cellular standard-essential patents had suffered no injury in fact and therefore lacked Article III standing to press its FRAND-based antitrust claims. On rehearing the panel withdrew that opinion and substituted a revised, unpublished decision, but the message to upstream suppliers was the same: you do not need your own SEP licenses to stay in business.

## At a glance

- **Case:** *Continental Automotive Systems, Inc. v. Avanci, LLC*, No. 20-11032 (5th Cir.), published opinion at 27 F.4th 326 (Feb. 28, 2022).
- **Court:** U.S. Court of Appeals for the Fifth Circuit; per curiam opinion of Judges Stewart, Ho, and Engelhardt.
- **Posture:** Appeal from the U.S. District Court for the Northern District of Texas (Chief Judge Barbara M.G. Lynn), which dismissed Continental's Sherman Act claims against the Avanci pool, Nokia, and other SEP holders.
- **Holding:** Continental lacked Article III standing because it suffered no cognizable injury; on rehearing the panel withdrew the published opinion and, in an unpublished revised opinion (June 21, 2022), affirmed dismissal on the merits for failure to state Sherman Act § 1 and § 2 claims.
- **Significance:** A leading U.S. data point in the "license to all" debate, supporting cellular SEP licensing at the vehicle (end-device) level rather than to every upstream component supplier.

## The supplier, the pool, and the refusal

Continental makes telematics control units (TCUs) — the modules that give vehicles cellular connectivity using 2G, 3G, and 4G standards. Those standards are blanketed by SEPs that suppliers cannot design around. Avanci operates a patent pool through which owners such as Nokia license their cellular SEPs to automakers at the level of the finished vehicle. Continental wanted licenses at the component level, on FRAND terms, directly for its TCUs. The pool and its members declined, preferring to license the OEMs that install Continental's modules.

Continental sued, alleging that the defendants had conspired to refuse FRAND licenses to suppliers and to monopolize the relevant technology markets, in violation of Sections 1 and 2 of the Sherman Act. It also claimed to be a third-party beneficiary of the licensing commitments the patent owners had made to standard-setting organizations. The district court dismissed the antitrust claims, and Continental appealed.

## Why the court found no injury

The published opinion turned on standing. Continental pressed two theories of harm, and the panel rejected both. The first — an indemnity theory — argued that Continental would ultimately bear the cost of supra-FRAND royalties because OEMs that overpay might seek indemnification from their suppliers. The court called that "doubly speculative": the injury depended on "several layers of decisions by third parties," including whether OEMs accepted non-FRAND licenses and then invoked indemnity rights. That chain was "too speculative to confer Article III standing."

The second theory was that the defendants' refusal to license suppliers was itself the injury. The panel disagreed. Even assuming Continental was a third-party beneficiary of the FRAND commitments, it "suffered no cognizable injury" because "it does not need to personally own SEP licenses to operate its business" and "has not been denied property to which it was entitled." The patent owners, the court observed, "license the OEMs that incorporate Continental's products," so Continental "does not need SEP licenses from Defendants-Appellees to operate." With no injury in fact, the court vacated and directed dismissal for lack of standing — without reaching the Sherman Act merits.

## The rehearing and the shift to the merits

Continental sought rehearing, and the panel granted it in part. The court withdrew the published 27 F.4th 326 opinion and substituted a short, unpublished revised opinion on June 21, 2022. The revision changed the *reasoning*, not the outcome. Rather than dismiss for lack of Article III standing, the panel assumed Continental could clear the standing threshold and affirmed the dismissal on the merits — holding that Continental had "failed to state claims" under Sherman Act Sections 1 and 2.

The merits rationale tracked the same practical point about who needs a license. Because the necessary SEP licenses were available at the end-device level — the automakers were licensed, and the pool's structure allowed owners to license independently as well — there was no anticompetitive harm to Continental of the kind the antitrust laws redress. Practitioners have noted the awkwardness of citing the case: the *published* opinion (the one in the Federal Reporter) rests on standing and was withdrawn, while the *operative* final disposition rests on the merits but is unpublished and non-precedential. Either way, the supplier lost, and the decision is widely read as endorsing OEM-level licensing of cellular SEPs.

## Open questions

- **License to all, or access to all?** The decision leans toward licensing at the end-device level but does not resolve, as a matter of national law, whether SEP owners must offer licenses to every willing implementer in the supply chain.
- **What remedies do suppliers have?** If suppliers cannot establish antitrust injury, it is unclear what avenue — contract, FRAND, or otherwise — lets them compel a direct license.
- **Which opinion controls the citation?** The published standing rationale was withdrawn while the merits rationale is unpublished, leaving uncertainty about what *Continental v. Avanci* actually "holds" for precedential purposes.

## Implications

- **Suppliers face an uphill antitrust climb.** A component maker that is denied a direct SEP license may struggle to show the injury or anticompetitive harm needed to sue.
- **End-device licensing gets practical support.** The court's reasoning bolsters the pool model of licensing cellular SEPs to vehicle makers rather than to every upstream supplier.
- **Third-party-beneficiary FRAND theories are fragile.** Even assuming the status, the court found Continental was denied nothing it was entitled to, weakening that pathway for suppliers.
- **Pool design that permits independent licensing helps defendants.** Because owners could license outside the pool, the arrangement did not look like an unlawful concerted refusal to deal.
- **Cite with care.** The published reporter opinion and the operative final disposition rest on different grounds, so counsel should be precise about which rationale they invoke.

## Frequently asked questions

**What are standard-essential patents and FRAND?**
A standard-essential patent (SEP) is one that cannot be avoided if a product complies with a technical standard, like 4G cellular. To get patents adopted into standards, owners usually promise standard-setting organizations to license them on fair, reasonable, and non-discriminatory (FRAND) terms. The dispute was over who is entitled to those licenses.

**Did Continental lose on standing or on the merits?**
Both, at different stages. The published opinion at 27 F.4th 326 held Continental lacked Article III standing because it suffered no injury in fact. On rehearing, the panel withdrew that opinion and issued a revised, unpublished opinion that assumed standing but affirmed dismissal on the merits, holding Continental failed to state Sherman Act claims.

**What does this mean for auto-parts suppliers seeking SEP licenses?**
It makes the antitrust path difficult. The court reasoned that suppliers like Continental do not need their own SEP licenses to operate because the vehicle makers that buy their parts are licensed. That logic supports licensing cellular SEPs at the end-device level rather than to every upstream component maker.

## Authorities and sources

- Fifth Circuit opinion (FindLaw), *Continental Automotive Systems, Inc. v. Avanci, LLC*: https://caselaw.findlaw.com/court/us-5th-circuit/2164047.html
- Justia case page, No. 20-11032 (5th Cir.): https://law.justia.com/cases/federal/appellate-courts/ca5/20-11032/20-11032-2022-02-28.html
- WIPO Lex judgment summary: https://www.wipo.int/wipolex/en/judgments/details/2198
- Baker Botts, "Back to the Future: Upstream SEP Implementer Standing": https://www.bakerbotts.com/thought-leadership/publications/2022/august/back-to-the-future-upstream-sep
- Mintz, "No Harm, No Foul, and No Standing for Would-be SEP Implementer": https://www.mintz.com/insights-center/viewpoints/2231/2022-03-03-no-harm-no-foul-and-no-standing-would-be-sep-implementer