Yesterday, Judge Andrews in the District of Delaware issued an Order that denied InterDigital’s motion to dismiss Microsoft’s Complaint that alleged violation of antitrust laws based on InterDigital’s enforcement of patents alleged to be essential to 3G and 4G cellular ETSI standards and subject to commitments to license on fair, reasonable and non-discriminatory (“FRAND”) terms.  At this early procedural stage of the case, the issue was not whether Microsoft would prevail in the case or whether the allegations in the Complaint were true; rather, at this initial case stage Judge Andrews considered whether Microsoft had stated “plausible” claims against InterDigital upon which relief could be granted if what Microsoft alleged in the Complaint was true when viewing the Complaint in a light most favorable to Microsoft.  He decided that was the case and is allowing the case to proceed.  This ruling itself is not necessarily important as a precedential matter given the relatively low threshold for surviving a motion to dismiss and inability to challenge the factual assertions, but this will be an interesting case to follow as it matures because it is one of the few contemporary instances of a U.S. court considering the application of competition law to standard essential patents (“SEPs”) with sophisticated parties on both sides of the issue.


Following is a summary of the Complaint and briefing on the motion to dismiss, which can help put into context the relatively brief decision by the court.

Microsoft’s Complaint

In August 2015, Microsoft filed a Complaint against InterDigital in the District of Delaware federal court alleging that InterDigital’s “abusive licensing practices and unlawful monopolization in the relevant markets for third-generation (‘3G’) and fourth-generation (‘4G’) cellular technologies” violated Section 2 of the Sherman Act, including allegations that InterDigital made “false promises to make its technologies available” on FRAND terms.  Microsoft alleged that InterDigital’s “patents … have market power because they cover technology mandated by the standards.”  Microsoft alleged that InterDigital falsely promised to license its patents on FRAND terms “so that other members of the SSO [standing setting organization] would include InterDigital technologies in the standards”, and led the SSO to exclude alternative technologies in the standard.  Microsoft then listed nine ways it alleges that InterDigital has “exploited its unlawfully acquired power against Microsoft”:

  • refused to honor the obligation to license its patents on FRANd terms;
  • demanded excessive and discriminatory royalties from companies that sell 3G and 4G devices;
  • tied access to its U.S. patents to its foreign patents along with the requirement that licensees pay royalties on worldwide sales;
  • tied access to its SEPs to licensing of its admittedly non-essential patents;
  • transferred hundreds of SEPs to a controlled entity in order to “double dip” in its royalty demands;
  • misappropriated technical information submitted by other standards members so that it could obtain patents in its name and accordingly profit from technologies created by others;
  • discriminated in its pricing demands against Microsoft based on Microsoft’s smaller market share relative to Microsoft’s competitors;
  • tied access to its SEPs and any proposed license terms for them to prospective licensee’s agreement to enter mandatory non-disclosure terms while refusing to disclose license terms provided to Microsoft’s competitors in order to hide InterDigital’s discriminatory pricing; and
  • pursued baseless infringement actions and baseless demands for injunctive relief and exclusion orders designed to increase Microsoft’s costs and thereby coerce Microsoft to capitulate to InterDigital’s unreasonable, non-FRAND demands.

No Intent To Exclude. Microsoft alleges wrongdoing because InterDigital “spen[t] millions of dollars on litigation solely seeking exclusion of Microsoft products” even though InterDigital “concedes that it has no interest in actually excluding anything”; rather, Microsoft alleges that InterDigital was just looking for licensing negotiation leverage.

Relevant Market.  Microsoft alleges that InterDigital has “monopoly power” in the relevant markets and “is the sole supplier in those markets, has excluded all competition, and has the power to charge supra-competitive prices and is in fact doing so.”  Microsoft defines the relevant market, for purpose of its antitrust claim, to be “the markets for technologies covered by the InterDigital patents issued in the United States and elsewhere that are essential, or are alleged to be essential, to the 3G and 4G cellular standards … together with all other alternative technologies to the InterDigital patents that could have been used in the cellular standards.”  Microsoft alleges broadly that “Once ETSI adopts technology for a cellular standard, the owner of each essential patent used in that standard obtains monopoly power in a relevant technology market.”  Microsoft asserts that the relevant market “can … be identified from InterDigital’s licensing declarations to ETSI.”  Microsoft alleges that there were “companies with technology capable of performing the same or equivalent functions which could have been adopted by ETSI” or “could have been used in alternative cellular standards that were foreclosed” when ETSI adopted a standard with InterDigital’s technologies. Microsoft alleges that ETSI’s intellectual property rights (“IPR”) would have required it to cease work on the Standard “if InterDigital had been truthful about its unwilingness to license on FRAND terms and conditions” and that, “but for InterDigital’s deception, alternate technologies would have been adopted by ETSI or no particular technology would have been specified.”

Microsoft alleges that, by “manipulat[ing] the standards-setting process,” InterDigital “now purports to control more than 1000 of the more than 40,000 patents that have been declared to be essential to the 3G UMTS standard and more than 800 of the 60,000 patents that have been declared to be essential to the 4G LTE standard.”  Microsoft alleges this allowed InterDigital to exclude alternative technologies “and unlawfully acquire[] market power” as “the sole supplier in the Relevant Technology Markets,” creating “high or insurmountable barriers to entry” into those markets.

Licensing Demands.  Microsoft alleges that InterDigital seeks supra-competitive royalties based on “an arbitrary percentage of the overall price of the cellular devices” that sell for hundreds of dollars, rather than being based on “chip components that implement the Standards” that sell for “just a few dollars.”  Microsoft further alleges that InterDigital’s royalty demands have created a “royalty stacking” problem, particularly given “hundreds of other entities [that] own thousands of patents declared essential to the Standards.”  Microsoft alleges royalty-stacking was further compounded by InterDigital creating new licensing entities and assigning them some of the relevant SEPs, thus adding another SEP owner seeking royalties.  Microsoft further alleges abuse by InterDigital seeking to license together its SEPs and non-SEPs, both domestic and foreign, rather than licensing “the few purported SEPs that it has asserted in litigation.”  In that regard, Microsoft alleges that InterDigital turned-down multi-million dollar checks that were tendered as royalty payments for U.S. sales–but not foreign sales–based on the royalty rate InterDigital had been seeking for worldwide sales.  Microsoft also alleges abuse of monopoly power by having volume discounts that “unfairly discriminates against Microsoft and other newer, lower-volume entrants in the cellular device industry.”  Further, Microsoft alleges that InterDigital transferred “hundreds” of patents to another licensing entity without reducing the licensing demand for its patent portfolio that no longer included those transferred patents, even though InterDigital previously licensed Microsoft’s competitors without charging more when those patents were part of InterDigital’s portfolio.

Non-Disclosure Agreements in Licensing Negotiations.  Microsoft alleges that InterDigital abused its monopoly power by  requiring all prospective licensees to “keep secret InterDigital’s licensing proposals” and by “refus[ing] to disclose the terms on which it has made its SEPs available to the competitors of would-be licensees.”  Microsoft asserts that “[t]ransparency in licensing of SEPs would, in contrast, enable prospective licensees to assess more effectively InterDigital’s non-compliance with its FRAND commitments.”

Harm To Competition.  Microsoft alleges that InterDigital’s conduct has harmed competition in the relevant market a number of ways:

  • excluded alternative technologies in the ETSI standards
  • obscured costs of including patented technologies in the Standard
  • prevented Microsoft from obtaining access to necessary technology on reasonable and non-discriminatory terms
  • customers, such as Microsoft, faced higher costs than they would have in a competitive market
  • transfer of patents to another entity added to cost for accessing the cellular technologies
  • consumers harmed by higher prices, reduced innovation and more limited choice for standard-compliant products and complementary cellular technologies
  • litigation fees and costs for avoiding supra-competitive licensing terms
  • uncertainty as to risk of an exclusion order from U.S. International Trace Commission (“ITC”) proceedings, threatening to erode customer loyalty, brand recognition and customer goodwill, and increasing Microsoft’s sales costs

Relief Sought.  The relief sought by Microsoft includes:

  • Patents that were declared essential should be rendered unenforceable
  • any agreements involving those patents (presumeably prior licenses with anyone) should be voided
  • Treble damages
  • An injunction that (1) “mak[es] available” to Microsoft in a non-confidential license on court-determined FRAND terms, (2) discloses to Microsoft the terms that InterDigital has licensed or offered to license it SEPs ,(3) bars InterDigital from taking any steps to enforce any ITC exclusion orders against Microsoft on an SEP; and (4) requires InterDigital to “re-assign any declared SEPs that it has assigned to controlled entities” (presumeably re-assing back to InterDigital so they are back in the same portfolio).

InterDigital’s Motion To Dismiss

In October 2015, InterDigital filed a Motion to Dismiss and Strike Microsoft’s Complaint.  InterDigital discussed the history of negotiations at issue, which originally involved negotiations with Nokia starting in 2005 and continued after Microsoft’s acquisition of Nokia’s mobile phone business in 2014.  InterDigital states that Nokia (and then Microsoft) refused to enter a license, even after all administrative law judges in three separate ITC investigations “rejected Nokia’s and Microsoft’s assertions that InterDigital failed to comply with FRAND commitments” and “Microsoft was determined by [one] ALJ to be an unwilling licensee who refuses to take a license.” (see our July 30, 2013 post re 337-TA-800;  July 2, 2014 post re 337-TA-868 and May 12, 2015 post re 337-TA-613). InterDigital suggests that, given the timing of this Complaint around the same time an ITC decision was due, Microsoft filed the complaint “simply as a tactic to gain leverage in the event of an adverse ITC decision.”  InterDigital further noted that this same district court already had dismissed similar allegations by Microsoft in prior and still pending (but stayed) lawsuits between the parties.

No Alleged Market Power. InterDigital argues that Microsoft failed to allege the requisite market power in a relevant market as required for a violation of Section 2 of the Sherman Act.  Rather, Microsoft alleges market power based on “each essential patent” used in the standard, but “nowhere asserts that InterDigital has an essential patent.”  The closest Microsoft comes are InterDigital declarations to ANSI, but those declarations merely state that InterDigital has patents that “may be or become essential.”  Microsoft’s failure to plead this essential element requires dismissing the Complaint.

No Exclusionary Conduct. Further, InterDigital argues that Microsoft failed to allege the required exclusionary conduct.  Microsoft’s alleges exclusion of alternative technologies that ETSI could have adopted in the standard, but does not identify any such alternative technology.  This too requires dismissing the Complaint.

Fraud Not Pled With Particularity.  InterDigital also argues that Microsoft failed to plead the alleged fraudulent acts underlying the antitrust claim with the particularity required to plead fraud.   For example, Microsoft alleged no facts to support its conclusory allegation that InterDigital “had a fraudulent intent because it knew at the time it made ETSI declarations that it had no intention of licensing on FRAND terms.”  Such conclusory allegations do not sufficiently plead fraud.

Noerr-Pennington Immunity.  InterDigital argued that the Noerr-Pennington Doctrine provides immunity from the alleged antitrust claim based on actions take to enforce patents.   This stems from the U.S. Constitution First Amendment right to petition the government for redress of grievances, such as filing lawsuits in the courts.  This First Amendment rights extends not only to the lawsuit itself, but activity “reasonably and normally attendant upon effective litigation” such as threats of litigation, pre-suit demand letters and settlement offers.  But Microsoft’s allegations are premised on litigations and threats of litigation, which are afforded Noerr-Pennington immunity.  There are only narrow exceptions to this immunity, such as “sham litigation”, which must be pled with particularity.  But Microsoft has not done so here.

For example, Microsoft pled no allegation that the 613 ITC investigation was objectively baseless when it was filed in 2007, and a mere ultimate lack of success on the merits is not grounds to find the litigation “objectively baseless.”  Further, Microsoft’s assertion that baseless lawsuits could coerce “capitulation to … abusive licensing demands” is “not plausible” because “there is no reason for a defendant to agree to an unfavorable settlement of a baseless lawsuit in which it is certain to prevail”–e.g., Microsoft did not explain how it, being a multi-billion dollar company, could be coerced by the “comparatively minor expenses of lawsuits” and Microsoft did not allege that it actually was coerced into taking a license (it took no license).  The risk of “patent holdup” could not exist for “sham litigation”, but “could only arise where the patent owner can assert at least a colorable, non-baseless patent lawsuit” and such non-baseless lawsuits have Noerr-Pennington immunity.

Further, InterDigital argues that Microsoft has not sufficiently alleged a Walker Process antitrust claim exempt from Noerr-Pennington immunity based on fraudulent procurement of a patent.  Microsoft alleged that InterDigital engineers participating in the SSO process sought and obtained a patent based on inventions actually made and disclosed by others during the SSO process.  But Microsoft did not plead that with specificity, only conclusory allegations.  Further, if Microsoft could show that its allegations were true, then no exclusion order or injunction could be obtained on the patent and there would be no “hold up”.  Further, Microsoft has not pled the other elements required for an antitrust violation based on the alleged fraudulently obtained patent.

InterDigital argued that First Amendment protection under Noerr-Pennington is particularly important here to protect the patent owner’s right to exclude that is fundamental to the patent right.  That right is enforced by “Courts serv[ing] a gatekeeping function that ensures that no purported ‘patent hold-up’ can occur … because any defenses to exclusionary relief based on FRAND obligations will be considered and adjudicated” before the court would grant any exclusionary relief.

No Alleged Causal Injury-In-Fact.  InterDigital argued that “Microsoft fails to allege an injury that it suffered caused by InterDigital’s alleged anticompetitive actions.”  Microsoft did not allege that it actually ever paid any alleged unreasonably high or discriminatory royalties.  Quit the opposite, because Microsoft has continued to sell 3G/4G devices without paying royalties while Microsoft’s competitors paid royalties.  The closest Microsoft gets to alleging actual harm is its litigation costs, but a complaint on such harm is barred by the Noerr-Pennington doctrine.

Strike Prayers for Relief.  InterDigital argues that Microsoft’s far-reaching request for relief should be stricken.  Microsoft has no standing to have thousands of patents declared unenforceable or have third-party contracts voided.  Microsoft also has not alleged sufficient facts to show a concrete dispute that all the SEPs are unenforceable or all contracts should be voided.  Further, Microsoft should not be allowed to rifle through confidential licensing agreements with Microsoft’s competitors–Microsoft itself has asserted that its licensing agreements are “highly sensitive and cannot be disclosed to competitors.”  Further, InterDigital argues that the statute of limitations precludes relief for any injury arising more than 4 years before the Complaint was filed.

Microsoft’s Opposition

In December, Microsoft filed its Opposition to the motion to dismiss, arguing that its allegations are similar to controlling Third Circuit precedent (where the Delaware court resides) in Broadcom v. Qualcomm, 501 F.3d 297 (3d Cir. 2007).

Monopoly Power.  Microsoft argues that it has sufficiently pled market power.    Microsoft’s claim is based upon a false FRAND commitment that does not require “alleging the essentiality of specific patents.”  Further, the Complaint does allege that the standards “include technologies over which [InterDigital] claims to have patents.”  In the Broadcom case, the Third Circuit did not require that the “patents were essential”, but only that the defendant patent owner “claimed them to be.”

Exclusionary Conduct.  Microsoft alleged exclusionary conduct and did not need to identify specific alternative technologies that were excluded from the standard based on InterDigital’s conduct.  Rather, the Third Circuit in Broadcom found adequate an allegation that, but for the false FRAND commitment, ETSI would not have selected the patented technology “even if that technology was the only candidate.”  Microsoft specifically alleges that, absent the anticompetitive conduct, ETSI would have adopted a different standard “or no standard at all.”

Sufficient Pleading of Fraud.  Microsoft argues that it meets the specificity requirement for pleading fraud by pleading “date, place or time”, which is what it did in identifying the patents subject to the FRAND commitment, to whom the commitment was made and when the commitments were made.  Further, it was sufficient for Microsoft to allege generally, rather than with specific facts, that InterDigital knew its FRAND commitment was false at the time the commitment was made.

Noerr-Pennington Not Applicable.  Microsoft argues that its complaint did not rely solely on litigation conduct.  Rather, it relied on false statements that led to InterDigital’s patented technology being adopted into the standard and then abusing the monopoly power so obtained by seeking high royalties, tying U.S. patents to foreign patents and non-SEPs.  InterDigital’s litigation conduct–even if  in good faith– could then be considered as part of the overall anticompetitive scheme.

Further, Microsoft argues its allegations are that the”FRAND commitments were intended to guarantee that [InterDigital] would not attempt to prevent implementers from using its patented technology by seeking injunctions, but would instead proffer licenses on FRAND terms, which [InterDigital] has not done.”  Microsoft argues that this is consistent with judicial and regulatory statements that FRAND commitments “foreclose the pursuit of injunctive relief except in circumstances where an implementer is unwilling or unable to take a license on FRAND terms.”    Microsoft had tendered royalty payments for InterDigital’s “U.S. sales”, but InterDigital declined.

Microsoft also argues that InterDigital’s litigations fell under the “sham exception” to Noer-Pennington.   Under Third Circuit law, a more flexible standard is used “when dealing with a pattern of petitioning,” where the issue is not if any one action has merit, but whether the litigations were brought under “a policy of starting legal proceedings without regard to the merits and for the purpose of injuring a market rival.”  Here, Microsoft alleges bad faith is shown by InterDigital filing ITC actions that can only aware exclusionary relief even though InterDigital has said that the goal was not to get exclusionary relief; rather, Microsoft alleges the goal was to get leverage to get high royalty rates from Microsoft continuing to practice the invention (not excluding Microsoft from practicing the invention).  Further questions about the litigation arise because Microsoft prevailed in the ITC cases, the ALJ statements were dicta not binding on the court and were rendered moot by subsequent full ITC Commission review.

Microsoft Alleged Injury.  Microsoft argues that it need not have actually “capitulated” to non-FRAND demands, but it was sufficient that such harm was “threatened”.  Microsoft also argues injury-in-fact because it “has been denied the ability to obtain a license to [InterDigital’s] SEPs on FRAND terms, which negatively affects its competitive position” and Microsoft has borne litigation expenses.  Further, the statute of limitations do not apply because the alleged misconduct falls under the continuing violation doctrine.

Prayers for Relief.  Microsoft argues its pled prayer for relief is sufficient, particularly at this early stage.

InterDigital’s Reply

No Alleged Market Power.  InterDigital replied that Microsoft’s allegations are missing what was required in the Third Circuit Broadcom case on which Microsoft relies.  That case required an allegation that “the defendant possesses standards-essential patents that the SSO included in the standard in reliance on a FRAND commitment.” [emphasis in original].  Thus, “[p]atents that were not included in a standard cannot, of course, even theoretically have market power based on standardization.”  Rather than alleging that such patents actually exist, Microsoft alleges the different, insufficient point that InterDigital “claims to have patents” covering the standard.  Further, the InterDigital declarations on which Microsoft relies only show that InterDigital believed it had patents that “may be” or “may become” essential, not that they were essential  In the Broadcom case, the plaintiff did specifically allege that the patent owner “induc[ed] the relevant SDOs to adopt 3G standards that incorporate [the patent owner’s] patents as an essential element.”  This missing link in this case–i.e., not alleged to actually be essential to the standard–is fatal to Microsoft’s claims.

No Alleged Exclusionary Conduct.  InterDigital argued that Microsoft wrongly asserts that there need not be alternative technology that the SSO would have adopt into the standard absent the misrepresentation.  Microsoft’s allegation that ETSI rules require it to “cease” standard development if no FRAND commitment is made omits the rest of the rule, which outlines a discretionary procedure that permits the SSO to adopt patented technology without a FRAND commitment when there is no alternative.

Insufficient Fraud Pleading.  InterDigital argues that Motorola did not sufficiently plead fraud, because it did not identify which patents were subject to false declarations.  This is particularly troublesome given the important condition precedent that the FRAND commitment is made only “to the extent the IPRs disclosed … are or become, and remain ESSENTIAL.”  Patents not included in the standard and, hence, not essential, are not subject to the FRAND commitment.

Noerr-Pennington Immunity Applies.  InterDigital argues that Microsoft’s allegations that are not directly premised on litigation are at least premised on litigation enforcement related activity, such as its licensing demands.  This litigating-related activity is protected by Noerr-Pennington.  Further, “if the alleged ‘false FRAND promise’ … was part of a scheme to allow … enforc[ment] of patents” at non-FRAND rates, than it is not “separate and distinct” from the patent enforcement conduct.

InterDigital argues that the FRAND commitment did not preclude seeking injunctive relief–indeed, the commitments “do not mention injunctions, much less express any intention whatsoever to forego the right to sue for injunctive relief.”  Further, Federal Circuit law, not Third Circuit law, should apply to the issue whether enforcing a patent can strip a patent owner of Noerr-Pennington immunity, and Microsoft’s pleadings do not meet the stricter standard that the Federal Circuit has indicated it would apply.

No Injury-In-Fact.  InterDigital argued that Microsoft has not shown how any supposed “threat” of harm that plausibly could have been realized.  Nokia/Microsoft refused to pay royalties for nearly a decade and Microsoft has not alleged that it has changed its products to avoid InterDigital’s patents.

Judge Andrew’s’ Decision

Judge Andrews generally observed that “it is difficult to discern any material differences between Microsoft’s complaint and the complaint which the Third Circuit found sufficient in Broadcom.”  He then walked through the analysis.

Monopoly Power.  Judge Andrews concluded, without explanation, that the Complaint’s allegations “are sufficient to show monopoly power” after citing the following allegations:

The complaint defines the relevant markets as “the markets for technologies covered by the InterDigital patents … that are essential, or alleged to be essential, to the 3G and 4G cellular standards …, together with all other alternative technologies to the InterDigital patents that could have been use in the cellular standards.”  This “technology was not interchangeable with or substitutable for other technologies and adherents to the [relevant] standard have become locked in.”  [InterDigital] “had the power to extract supracompetitive prices, it possessed a dominant market share, and the market had entry barriers.” [internal citations omitted]

Anticompetitive Conduct.  Judge Andrews next addressed anticompetitive conduct, finding that was sufficiently pled after citing allegations from the Complaint without further explanation:

The complaint alleges that [InterDigital] made an “intentional false promise that [it] would license its … technology on FRAND terms, on which promise [ETSI] relied in choosing the … technology for inclusion in the” relevant standards.  This conduct “induced” ETSI to adopt a technology “that they would not have considered absent a FRAND commitment.”  Following the incorporation of its technology, the complaint alleges, [InterDigital] refused to comply with its FRAND licensing obligations.

Injury.  Judge Andrews stated that “Microsoft must plead more than injury to itself”, but “must show that [InterDigital’s] conduct harms competition.”  He found this issue “entwined” with the Noerr-Pennington issues.  He found that Microsoft’s alleged injury went beyond just InterDigital seeking to enforce its patents and the attorneys fees /litigation costs attendant with that.  Rather, Microsoft’s alleged harm further includes other harm:

[Allegations that InterDigital’s] wrongful conduct “prevented Microsoft from obtaining access to necessary technology” in the relevant markets; that “there is a substantial threat that Microsoft will be forced to capitulate to InterDigital’s supra-competitive licensing demands;” that “the artificial imposition of higher costs on Microsoft threatens further loss of market share, as does the threat of an exclusion order;” that the “downstream market” is injured in the form of “higher prices, reduced innovation, and more limited choice[s] … for such Standard-compliant products;” that “an exclusion order creates uncertainty as to Microsoft’s line of cellular devices,” which “threaten[s] to erode customer loyalty, brand recognition, and customer goodwill;” and that Microsoft “is threatened with additional harm in the form of the loss of customers and potential customers, the loss of product image and goodwill, and other irreparable harm to its line of cellular devices.”

Judge Andrews found this allegation sufficient to allege harm.    In doing so, he quotes favorably from a treatise that states “if the antitrust violation is intentional deception of the standard-setting organization, the fact that one of the ways that causes harm is that the patentee sues adopters and seeks an injunction shouldn’t defeat the antitrust claim based on conduct before the standard-setting organization.” (quoting Herbert Hovenkamp et al., IP and Antitrust § 35.5b2 (2d ed. Supp. 2013)).

Judge Andrews then considered whether the litigation-related conduct could be considered.  He noted that courts have reached different conclusions on whether litigation may be included as part of a scheme to violate antitrust law.  He ruled that Federal Circuit law, not regional circuit law, applies to this issue.  But the Federal Circuit has not decided the issue.  Another district court had ruled that the Federal Circuit “would choose a middle ground ‘causal connection’ test.” (quoting Hynix Semiconductor v. Rambus, 527 F. Supp. 2d, 1084, 1095-97 (N.D. Cal. 2007)).  That standard is as follows:

“[B]efore otherwise protected litigation can be part of an ‘anticompetitive scheme’ claim, the court must first find that the other aspects of the scheme independently produce anticompetitive harms,” and upon so concluding, “the court should ask whether the accused patent litigation was causally connected to these anticompetitive harms.”

Having already found that the other conduct states an antitrust claim, Judge Andrews concluded there was a causal connection to the litigation-related conduct where the litigation “to enforce [InterDigital’s] purported SEPs are part of the way in which [InterDigital] accomplishes its alleged anticompetitive scheme,” stating that “[t]he entire scheme ‘is ineffective without the threat of litigation.'”

Fraud Pleading Standard.  Judge Andrews ruled that Microsoft’s allegations must meet the fraud pleading standard that requires specificity.  But he found the allegations were sufficient because InterDigital’s declarations to ETSI attached to the Complaint showed the “date, place or time” of the fraud by identifying “when the false FRAND declarations were made, by whom and for which patents.”

Prayer for Relief.  Judge Andrews found that the statute of limitations did not bar relief for conduct prior to four years ago, because “the complaint alleges misrepresentations that occurred [after the four-year period], and that [InterDigital] is engaged in an ongoing scheme that has resulted in continuing injury.”  He also declined to exercise his discretion to strike the various other requests for relief because that’s “an extreme measure”, there was “no value” in granting the motion now and striking the claims now would be “premature.”

Based on the foregoing, Judge Andrews denied InterDigital’s motion to dismiss, which allows the case to continue proceeding at this early stage.

You will soon see a new and improved Essential Patent Blog.  Let us know if there are features about the blog you would like to see, change or omit.  One of the blog features under review is our “Resources” section where we list scholarly papers, articles and other resources dealing with standard essential patents.  We want to update that list of resources.  So please let us know if you have a paper or other resources that would warrant posting as a “Resource”.

For example, we just added papers submitted for an AIPLA presentation a few weeks ago on litigating standard essential patents at the U.S. International Trade Commission (ITC), where we discussed the ITC as a unique agency and unique procedural issues in litigating SEPs at the ITC.

Continue Reading Help us help you …

Last week, the Federal Circuit en banc ruled that the sale of a product abroad by a U.S. patent holder (or others) does not exhaust the patent owner’s U.S. patent rights, such as the right to exclude sale or importation of that product within the United States.  Further, the Federal Circuit ruled that, when a U.S. patent holder sells a product with expressed restrictions on resale or reuse of that product, the patent exhaustion doctrine does not preclude the patent owner from exercising its right to exclude resale or reuse of that product.  The Federal Circuit summarized its ruling as follows:

Continue Reading Federal Circuit rules sale abroad does not exhaust U.S. patent rights (Lexmark v. Impression)

Last week, the Federal Circuit denied en banc review by the entire court of the three-judge panel decision in the Apple v. Samsung case that had revived the ability to obtain injunctive relief against multiple component products, such as smartphones (see our Sep. 17, 2015 post).  In doing so, the original three-judge panel (Prost, Moore and Reyna) issued an Order that withdrew their original opinion and issued a revised opinion that focuses on the patented feature being “one of several [features] that cause consumers to make their purchasing decision,” rather than the patented feature having to be “the exclusive or significant driver of customer demand” as prior decisions had intimated.

Continue Reading Federal Circuit revised injunction decision to emphasize patented feature being one of several that drive purchasing decision (Apple v. Samsung)

Ericsson and Apple reportedly have settled the patent disputes between them, including those involving standard essential patents that were pending in district courts in California and Texas as well as in the U.S. International Trade Commission.  This is reported to be a 7-year agreement that involves cross-licensing as well as Apple paying royalties to Ericsson.  Details of the agreement are not available.

It is not clear what spurred the settlement.  The Federal Circuit’s recent CSIRO decision a few weeks ago on determining infringement damages for standard essential patents probably favored Ericsson’s royalty requests in those cases because it continued the Federal Circuit’s trend of favoring damages model that rely on actual real world licenses and dispels the myth that all patent damages models must always start with the smallest salable patent practicing unit (see our Dec. 3, 2015 post).  This would have allowed Ericsson to rely more heavily on its established historical licensing program to establish royalty damages against Apple, and would have hindered a smallest salable patent practicing unit damages model that defendants have sought to assert against standard essential patents (as well as patents in general).

Today, a three-judge Federal Circuit panel (Prost (author),  Dyk and Hughes) issued its awaited decision in CSIRO v. Cisco that agreed-in-part and disagreed-in-part with Judge Davis’ damages award based on patents alleged to be essential to the IEEE 802.11 WiFi standard, but which patents did not have any FRAND or other standard-setting obligation (see our July 28, 2014 post on Judge Davis’ decision).  This is an important decision that provides incremental insight into proving and determining a reasonable royalty for a standard essential patent, which includes further insight into the Federal Circuit’s first decision on this issue a year ago in Ericsson v. D-Link that involved a standard essential patent that did have a FRAND obligation under the IEEE 802.11 WiFi standard (see our Dec. 5, 2014 post on the Ericsson v. D-Link decision).

This is an important decision to read directly to catch all the nuances and import of the decision, and the incremental guidance it provides in determining a royalty rate as a matter of patent damages law for past infringement of a patent that is essential to a standard.  A few particularly important points come from the decision.

First, the Federal Circuit soundly rejected as “untenable” the accused infringer’s argument that there is a “rule” that all patent damages methodologies always must start out using the smallest salable patent-practicing unit.  The smallest salable patent practicing unit is a principle that can aid courts to determine if a damages expert’s methodology reliably apportions to the patent only the value that the patented technology provides to the infringing product and not other unpatented features.  But it is not the only approach that may be considered, and different cases present different factual circumstances that could lend themselves to different reliable methodologies.  For example, damages methodologies properly may rely on real-world comparable licenses to reliably apportion value to the patented technology, whether the royalties are based on end products or components thereof.  This decision may very well put to rest arguments that there is some “rule” requiring use of the smallest salable patent-practicing unit or that there is any problem per se in royalties being based on the end product rather than its components.

Second, the Federal Circuit clarified that the need to apportion the value of the patented technology from the value of standardization applies whether or not a standard essential patent is subject to a FRAND or other standard setting obligation.  This is based on the long-standing, fundamental principal that statutory damages for infringement under 35 U.S.C. § 284 must be based on the value of the patented invention and not other unpatented features, whether that’s other unpatented technology in an infringing  product or the value of the patent being essential to a standard.


Patent owner Commonwealth Scientific and Industrial Research Organization (“CSIRO”) is the principal scientific research organization for the Austrialian Federal Government.  The patent-in-suit (U.S. Patent No. 5,487,069 or “the ‘069 Patent”) addresses multipath problems in a wireless local area network.  That technology was incorporated into certain versions of the IEEE 802.11 WiFi standard, including revision “a” adopted in 1999 and revision “g” adopted in 2003.  In December 1998, before IEEE adopted revision “a”, CSIRO provided the IEEE with a letter of assurance that it would license the specific patent-in-suit on RAND-terms if the patent were essential to the 802.11a standard.  IEEE sought additional letters of assurance from CSIRO for later revisions of the standard, but CSIRO declined to provide them.

Radiata Technology License Agreement (TLA).  Shortly after the patent issued, a company called Radiata Communications (“Radiata”)  was formed by the named inventor, CSIRO and others to commercialize the patented technology.  Radiata employed various CSIRO employees as well as another named inventor.  CSIRO entered a Technology License Agreement (TLA) with Radiata in February 1998 that, among other things, had a per-WiFi chip royalty payment, decreasing from 5% royalty per chip to 1% as the volume of licensed chips increased.  In 2001, Cisco acquired Radiata and started paying Radiata’s license fees under the TLA license agreement for Radiata products.  This agreement was renegotiated several times, always keeping the general concept of a per-chip royalty base.

CSIRO’s License Rate Card.  In 2003, CSIRO offered industry participants a license on RAND terms on all versions of the standard (at first indicating that it had agreed with IEEE to do so, but later clarifying there was no RAND obligation).  By June 2004, CSIRO developed a Voluntary Licensing Program offering licenses to the ‘069 Patent under “a flat-fee royalty, charged per end product unit sold” under what it called a “Rate Card” structure.  The lowest royalty rate under this structure was $1.40 to $1.90 per unit.  But CSIRO did not have anyone take a license under this Rate Card.

Cisco’s Offer In Negotiations.  In 2004, CSIRO approached Cisco about licensing the patent under the Rate Card schedule, but Cisco did not accept that offer.  During discussions in 2005, Cisco’s Vice-President of Intellectual Property informally suggested that $0.90 per unite might be an appropriate royalty rate.  That rate was about what Cisco had been paying under the initial TLA agreement after Cisco acquired Radiata.

District Court Litigation.  In July 2011, CSIRO sued Cisco for infringing the patent-in-suit.  Both parties stipulated to a bench trial solely on damages and that Cisco would not challenge the patent’s infringement or validity.  In February 2014, Judge Davis held a four-day bench trial on damages.

CSIRO’s damages model was premised on the profit difference between (1) Cisco products using versions of the 802.11 WiFi standard that incorporated the patented technology (IEEE 802.11 versions a and g) and (2) Cisco products using versions of the WiFi standard that did not use the patented technology (IEEE 802.11 version b).  CSIRO argued that the difference between the two versions primarily was attributable to the patented technology.  This led to CSIRO proposing a volume-tiered royalty ranging from $1.35 to $2.25 per end unit (totaling about $30 million for past infringement).

Cisco’s damages model was premised on the original Radiata TLA, leading to a volume-tiered royalty ranging from $0.03 to $0.37 per WiFi chip (totaling about $1 million for past infringement).

Judge Davis rejected both proposed damages models.  Rather, he created a model premised on CSIRO’s 2004 Rate Card and the rate informally suggested by Cisco’s Vice-President during negotiations with CSIRO.  This led to a “reasonable starting point” for negotiations of a royalty in the range from $0.90 to $1.90 per unit.  Judge Davis then considered various Georgia-Pacific factors to the extent he deemed them appropriate and ultimately concluded they were neutral and, thus, did not require adjusting the royalty rate further.  While he used that royalty rate for the Cisco-branded products, he did downwardly adjust that rate to Cisco’s Linksys-branded products because they had a lower profit margin.

So Judge Davis ultimately awarded a volume-tiered royalty structure that ranged from $0.90 to $1.90 for Cisco-branded products and a slightly lower structure ranging from $0.65 to $1.38 for the Linksys-branded products.  This led to a total damages amount of $16,243,067 for past infringement.

Below  is a table comparing the royalty argued by the parties and that awarded by Judge Davis:

  • CSIRO                 $1.35 to $2.25 per unit ($30 million total)
  • Judge Davis        $0.65 to $1.90 per unit ($16 million total)
  • Cisco                   $0.03 to $0.37 per unit ($1 million total)

Federal Circuit Decision

On appeal to the Federal Circuit, Cisco raised three arguments seeking reversal, alleging that Judge Davis erred by:

  • Not starting with the wireless chip as the royalty base, which was the smallest salable patent practicing unit
  • Not adjusting Georgia-Pacific factors to account for the patent being essential to a standard
  • Not giving credit to Cisco’s TLA evidence.

Smallest Salable Patent-Practicing Unit.  The Federal Circuit started with what it deemed a long-standing rule of apportionment when awarding damages for patent infringement under 35 U.S.C. § 284, stating:

Under § 284, damages awarded for patent infringement must reflect the value attributable to the infringing features of the product, and no more.  This principle—apportionment—is the governing rule where multi-component products are involved.  Consequently, to be admissible, all expert damages opinions must separate the value of the allegedly infringing features from the value of all other features. [internal quotations and citations omitted].

Courts must use their gate-keeping authority to ensure expert testimony “using whatever methodology” is “sufficiently reliable to support a damages award,” because parties have “great financial incentive … to exploit the inherent imprecision in patent valuation.”  The Federal Circuit said that the “essential requirement” for such reliability is apportionment:

And as we have repeatedly held, the essential requirement for reliability under Daubert is that the ultimate reasonable royalty award must be based on the incremental value that the patented invention adds to the end product.  In short, apportionment. [internal quotations and citations omitted]

There may be more than one reliable method to estimate the royalty, since different cases present different facts, but its important that whatever methodology is used is “sufficiently tied to the facts of the case”:

In practice, this means that abstract recitations of royalty stacking theory, and qualitative testimony that an invention is valuable—without being anchored to a quantitative market valuation—are insufficiently reliable.  Where the data used is not sufficiently tied to the facts of the case, a damages model cannot meet the substantive statutory requirement of apportionment of royalty damages to the inventions value. [internal quotations and citations omitted]

The Federal Circuit then discussed the smallest salable patent-practicing unit being one principle that can “aid courts in determining when an expert’s apportionment is reliable.”  There are two justifications for it:

First, where small elements of multi-component products are accused of infringement, calculating a royalty on the entire product carries a considerable risk that the patentee will be improperly compensated for non-infringing components of that product.  Second is the important evidentiary principle that care must be taken to avoid misleading the jury by placing undue emphasis on the value of the entire product.  *** Fundamentally, the smallest salable patent-practicing unit principle states that a damages model cannot reliably apportion from a royally base without that base being the smallest salable patent-practicing unit.  [internal quotations and citations omitted]

But the court found that principle did not apply here, because the district court was not apportioning from a royalty base, but started with real-world negotiations between the parties that “already built in apportionment” based on Cisco’s suggested $0.90 per unit royalty as a lower bound and the $1.90 per unit royalty from CSIRO’s Rate Card as the upper bound:

Because the parties’ discussions centered on a license rate for the ‘069 patent, this starting point for the district court’s analysis already built in apportionment.  Put differently, the parties negotiated over the value of the asserted patent, and no more.  The district court still may need to adjust the negotiated royalty rates to account for other factors, but the district court did not err in valuing the asserted patent with reference to end product licensing negotiations. [internal quotations and citations omitted]

The Federal Circuit soundly rejected as “untenable” Cisco’s suggested “rule” that “would require all damages models to begin with the smallest salable patent practicing unit,” which would conflict with other accepted methodologies such as using comparable licenses:

The rule Cisco advances—which would require all damages models to begin with the smallest salable patent-practicing unit—is untenable.  It conflicts with our prior approvals of a methodology that values the asserted patent based on comparable licenses.  Such a model begins with rates from comparable licenses and then accounts for differences in the technologies and economic circumstances of the contracting parties.  Where the licenses employed are sufficiently comparable, this method is typically reliable because the parties are constrained by the market’s actual valuation of the patent.  Moreover, we held in Ericsson that otherwise comparable licenses are not inadmissible solely because they express the royalty rate as a percentage of total revenues, rather than in terms of the smallest salable unit.  Therefore, adopting Cisco’s position would necessitate exclusion of comparable license valuations that—at least in some cases—may be the most effective method of estimating the asserted patent’s value.  Such a holding would often make it impossible for a patentee to resort to license-based evidence.

Accordingly, we conclude that the district court did not violate apportionment principles in employing a damages model that took account of the parties’ informal negotiations with respect to the end product. [internal quotations and citations omitted]

The Federal Circuit stated in a footnote that the choice of royalty base did not matter in the district court’s analysis in this particular case because it was per unit of end product, which in this case “could equally have represented” a per unit royalty per WiFi chip “without affecting the damages calculation.”

Standardization.  The Federal Circuit agreed with Cisco that the district court erred by not “account[ing] for any extra value accruing to the ‘069 patent from the fact that it is essential to the 802.11 standard.”  Relying on the Ericsson v. D-Link decision, the Federal Circuit stated that there are “unique considerations that apply to apportionment in the context of a standard-essential patent”, and these considerations applied even for standard essential patents that did not have a RAND or other standard-setting obligation (as is the case for the CSIRO patents at issue here).  Damages methodologies applied to standard essential patents (“SEPs”) must “capture the asserted patent’s value resulting … only from the technology’s superiority” and “not from the value added by the standard’s widespread adoption.”

[A] reasonable royalty calculation under § 284 attempts to measure the value of the patented invention.  This value—the value of the technology—is distinct from any value that artificially accrues to the patent due to the standard’s adoption.  Without this rule, patentees would receive all of the benefit created by standardization—benefit that would otherwise flow to consumers and businesses practicing the standard.  We therefore reaffirm that reasonable royalties for SEPs generally—and not only those subject to a RAND commitment—must not include any value flowing to the patent from the standard’s adoption.

The Federal Circuit found that Judge Davis erred by not taking account for standardization but, instead, he “increased the royalty award because the ‘069 patent is essential to the 802.11 standard.”  For example, Judge Davis found that Georgia-Pacific Factors 8-10 favored increasing the royalty given commercial success and widespread adoption of the technology, but “the district court never considered the standard’s role in causing commercial success.”  Further, Judge Davis relied on the rates as a starting point without considering whether such rates “themselves may be impacted by standardization”:

The parties do not dispute that CSIRO actively refused to submit a letter of assurance to the standard-setting body, for later iterations of the 802.11 standard, after the ‘069 patent was locked into the standard.  It seems quite possible, then, that CSIRO’s Rate Card rates attempt to capture at least some value resulting from the standard’s adoption.  CSIRO’s offer was not accepted by a single entity.  On remand, the district court should consider whether the initial rates taken from the parties’ discussions should be adjusted for standardization.

TLA Agreement Between CSIRO and Radiata.  The Federal Circuit found this to be a fact sensitive issue whether Judge Davis erred in not giving more weight to the TLA, and ultimately found that he had erred and should reconsider the issue on remand.  Among other things, the agreement “is the only actual royalty agreement between Cisco and [CSIRO]” and “it is contemporaneous with the hypothetical negotiation.”

Today, a divided three-judge panel of the Federal Circuit (Prost, O’Malley concurring and Newman dissenting) ruled that the U.S. International Trade Commission’s (ITC) authority to provide remedies for unfair acts involving importation of “articles” does not extend to electronic transmission of digital data into the United States.  In addition to its impact on the ITC’s jurisdiction over certain patent infringement matters, this case provides insight into administrative law that may be worth reading for those interested in that issue.  We will not go into that lengthy analysis here, but do provide below a summary of the infringement at issue.  Given the division among the three-judge panel and impact of this decision on the scope of the ITC’s jurisdiction and emerging technologies (e.g., transmission of digital files used to print 3D models), this decision may be subject to requests for en banc review by the entire Federal Circuit or Supreme Court review.

The patents and infringement at issue concern using different stages of teeth aligners that are progressively swapped out over time to slowly transition a patient’s teeth from an initial (e.g., crooked) position into a final (e.g., straightened) position.  ClearCorrect US (located in the U.S.) would take measurements of the patient’s initial teeth positions and transmit that data to ClearCorrect Pakistan (located in Pakistan).  That Pakistani entity would generate digital models of intermediate positions of the teeth, each intermediate position corresponding to an aligner to be made in the progressive process of moving the teeth from an initial position to a final position.  The Pakistani entity electronically transmits those digital models back to the U.S. entity, which uses those digital models to 3D print each of the physical aligners to be used by the patient.

The patent owner argued that the Pakistani entity contributed to infringement of the patents by electronically transmitting the digital models of the different teeth aligners into the U.S.:

Here, the accused “articles” are the transmission of the “digital models, digital data and treatment plans, expressed as digital data sets, which are virtual three-dimensional models of the desired positions of the patients’ teeth at various stages of orthodontic treatment” (“digital models”) from Pakistan to the United States.

The full Commission reviewed the ALJ’s decision and held that (1) the U.S. entity’s direct infringement was solely in the United States and, thus, was not a 337 importation violation within the ITC’s jurisdiction, but (2) the Pakistani entity contributorily infringed the patents by transmitting the digital models into the United States and such infringement was a 337 violation within the ITC’s jurisdiction to grant exclsionary relief.

As discussed, on appeal, the panel majority held that the electronic transmission of digital data into the United States is not an “article” of importation into the United States within the remedial authority of the ITC.  The panel majority stated that Congress is in the best position to determine whether the term “article” should be extended to cover these circumstances.

Today, the Supreme Court granted certiorari in two patent cases to review the standard for willful infringement.  The two cases, consolidated for review, are Halo Electronics, Inc. v. Pulse Electronics, Inc., et al., No. 14-1513, and Stryker Corp. et al. v. Zimmer, Inc., et al., No. 14-1520.

The grant states that it will address Question 1 presented in the Halo case, which states:

     1.  Whether the Federal Circuit erred by applying a rigid, two-part test for enhancing patent infringement damages under 35 U.S.C. § 284, that is the same as the rigid, two-part test this Court rejected last term in Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. Ct. 1749 (2014) for imposing attorney fees under the similarly-worded 35 U.S.C. § 285.

The Stryker case had two questions presented, which were as follows:

     1. Has the Federal Circuit improperly abrogated the plain meaning of 35 U.S.C. § 284 by forbidding any award of enhanced damages unless there is a finding of willfulness under a rigid, two-part test, when this Court recently rejected an analogous framework imposed on 35 U.S.C. § 285, the statute providing for attorneys’ fee awards in exceptional cases?

2. Does a district court have discretion under 35 U.S.C. § 284 to award enhanced damages where an infringer intentionally copied a direct competitor’s patented invention, knew the invention was covered by multiple patents, and made no attempt to avoid infringing the patents on that invention?

The Federal Circuit’s opinions subject to review are Halo Electronics, Inc. v. Pulse Electronics, Inc., 769 F.3d 1371 (Fed. Cir. 2014), in which a divided court denied en banc review., and Stryker Corp. v. Zimmer, Inc., et al., 782 F.3d 649 (Fed. Cir. 2015), in which the original Federal Circuit three-judge panel granted limited panel rehearing that issued a revised opinion on the objective recklessness prong of willful infringement.

The Fall season brings not only football, changing leaves and pumpkins, but also many program opportunities on your favorite legal issues — ours being standard essential patents.  Here are some program opportunities in the coming weeks to consider:

Today, Tuesday Oct. 13 at 2pm – 3pm Eastern, Intellectual Property Owners Association IP Chat Channel online webinar program on Standards and FRAND: Recent Developments in the U.S. and Europe.  This program will look at recent developments in the U.S. and Europe concerning standard essential patents, including the Ninth Circuit’s decision in the Microsoft v. Motorola case (see our July 31, 2015 post), the European High Court’s ruling in Huawei v. ZTE (see our July 16,2015 post), and developments in the U.S. International Trade Commission after the U.S. Trade Representative’s disavowal in 2013 of exclusionary relief in the Samsung v. Apple investigation (see, e.g., our Aug. 31, 2015 post where full Commission again dodges FRAND issues).   Speakers for this program include our own David W. Long, who is a Vice-Chair of IPO’s Litigation Committee.  More information and registration can be found at this IPO website link.

Oct. 19 – 20 in Reston, VA, The 15th Annual Sedona Conference on Patent Litigation: Improving the Efficiency of Handling Patent Litigation.  This in-person program will focus on three main areas of patent litigation: (1) patent litigation case management in light of patent legislation efforts and recent case developments; (2) litigating standard essential patent cases; and (3) coordinating parallel proceedings in district court and inter partes review in the U.S. Patent and Trademark Office.  There will be three panels discussing standard essential patent issues in the areas of patent owner and prospective licensee obligations based on standard setting commitments, determining what is a fair, reasonable and non-discriminatory royalty rate, and efficiently managing cases before district courts and the International Trade Commission.  Our own David W. Long is a Co-Chair for the overall conference and a speaker.  More information and registration can be found at this Sedona Conference website link.

Oct. 22 – 24 in Washington, DC, American Intellectual Property Law Association’s 2015 Annual Meeting.  This year’s AIPLA Annual Meeting offers two programs on standard essential patents.  On Thursday, Oct. 22, at 3:30 pm, AIPLA’s Antitrust Committee and Standards & Open Source Committee are sponsoring a joint program on Antitrust Law/Standards.  This program will focus on the intersection of antitrust law and patent law, such as the U.S. and Chinese competition agency investigations and standardization reform.  Speakers include Renata Hesse, a Deputy Assistant Attorney General in the U.S. Justice Department’s Antitrust Division, and Dina Kallay, the Director of Intellectual Property & Competition at Ericsson.  This program will be moderated by our own David W. Long, Chair of AIPLA’s Standards & Open Source Committee.  On Friday, Oct. 23, at 10:30 am, there will be a program on Antitrust Challenges: The Interface Between the Competition Law and IP Law that will address those issues being faced in Europe and China.  Speakers include Mathew Heim of Qualcomm and Mark D. Whitener of General Electric.  More information and registration for AIPLA’s Annual Meeting can be found at this AIPLA website link.

Microsoft and Google announced that they have settled there global patent disputes, including the litigation underlying the FRAND dispute that gave rise to Judge Robart’s first-of-its-kind decision on determining a FRAND royalty that was recently affirmed on appeal at the Ninth Circuit (see our July 31, 2015 post).  Accordingly, the parties filed yesterday a stipulated motion to dismiss the remainder of the case still pending before Judge Robart.

The agreement between the parties is said to resolve about 20 lawsuits in the U.S. and abroad, so its not clear how much the Ninth Circuit’s ruling in the Judge Robart case impacted the settlement.  The settlement, however, was announced after the Ninth Circuit denied the petition for rehearing of its decision and its mandate issued without a party seeking further review from the Supreme Court.  So this decision may provide another example of a court’s determination of the royalty amount leading to resolution of the litigation without the parties or the court litigating the issue whether the patent is valid and infringed, as occurred in the Innovatio litigation before Judge Holderman under his “reverse bifurcation” procedure (see our Feb. 7, 2014 post on Innovatio).

Recall that Google inherited the Judge Robart case when it acquired Motorola Mobility, including its patent portfolio and mobile phone business, the latter of which Google later sold to Lenovo while holding onto the patents.  Google’s business model is much different from the Motorola Mobility entity it acquired, which had been actively enforcing its patent portfolio against Microsoft and others before the acquisition.  Google may value and use the patents differently than Motorola had been, such as using for defensive purposes if someone targets Google’s Android platform.  Recall that the U.S. Federal Trade Commission (FTC) investigation of Google a few years ago shifted to Motorola’s assertion of standard essential patents (SEPs) after Google acquired Motorola, which led to Google/Motorola entering a consent decree with the FTC (see our January 2013 post).  Google also ended patent litigation disputes that Motorola had with Apple, which also included SEPs (see our May 19, 2014 post).  So Google’s settlement with Microsoft here is not too surprising.