Earlier this week, both Nokia and BlackBerry (formerly Research In Motion) were both granted leave to file amicus briefs with the Federal Circuit in the Apple v. Motorola appeal of Judge Posner’s June 2012 decision to dismiss the parties’ respective infringement claims. BlackBerry’s brief is still confidential, but Nokia’s is now publicly available.
While Nokia’s amicus brief is styled as being “in support of neither party,” it’s clear that Motorola should be the one happy here — Nokia asks the Federal Circuit to reverse Judge Posner’s decisions relating to Motorola’s standard-essential patents at issue, both with respect to damages and injunctive relief. Nokia claims that Judge Posner’s ruling (1) creates a bright line rule against injunctions that violates Supreme Court precedent, and (2) unnecessarily devalues standard-essential patents by mandating that any damages be based on the smallest salable unit, which runs contrary to industry practices in SEP licensing. A summary is after the jump.
Injunctions – “Should be determined on a case-by-case basis”
Like Motorola and several amici such as Qualcomm, Nokia criticizes Judge Posner for appearing “to fashion a bright-line rule prohibiting injunctive relief under all circumstances in the standard-essential patent context,” arguing that Judge Posner apparently did not consider whether Apple was a willing or unwilling licensee before ordering that Motorola could not be entitled to injunctive relief on a FRAND patent. According to Nokia, this violates not just the Supreme Court’s prohibition on “categorical rules” in eBay v. MercExchange, but the approaches suggested (and even adopted) by federal agencies such as the Federal Trade Commission, the U.S. Department of Justice, and the USPTO.
Nokia argues that eBay and the federal agencies counsel a balanced, case-by-case approach to the injunction analysis, to determine “whether an individual licensee has refused to engage in negotiations to determine FRAND terms for a license and to pay such negotiated or determined compensation to the patent owner.” By contrast, Nokia asserts, a complete bar on injunctive relief for FRAND patents would disincentive potential licensees to negotiate in good faith, leading to increased patent litigation and the potential for decreased participation in standard-setting activities.
Damages – “Should not be limited to the smallest salable component embodying the patent”
Nokia argues that for standard-essential patent-related damages in the area of networked telecommunications products, the royalty base should not be limited to the “smallest salable unit,” as urged by Apple and other amici. Nokia asserts that standard-essential patents “are typically licensing using the price of the end product to arrive at the appropriate royalty rate as well as the base against which to apply the rate.” It further claims that telecom SEP holders do not usually license — or have any obligation to license — component manufacturers (such as Marvell or Intel). As a result, according to Nokia, the current market prices for these component chips (often in the range of a few dollars each) are unusually low, because they do not include royalty costs for standard-essential patents owned by many SEP holders.
Nokia also argues that SEPs “enable features and efficiencies” for both end user devices and networks, for beyond interoperability benefits. (This is sometimes expressed as “synergies” or the “synergistic” benefits of SEPs.) Nokia claims that because of this often hard-to-quantify quality of SEP technology, establishing the smallest salable component rule for telecom SEP damages “runs the risk of vastly undercompensating holders of telecommunications standards essential patents and discouraging further investment in telecommunications standards.” Thus, at least for telecommunications-related SEPs, Nokia asserts that based on industry practice, royalty rates based on the “entire market value of the end product” are appropriate. (Nokia does not address, however, how this approach squares with Federal Circuit precedent disfavoring the use of the entire market value rule, such as LaserDynamics v. Quanta.)