Later this year, in the case of Apple Inc. v. Motorola Inc. (Nos. 2012-1548, -1549), the Federal Circuit is set to address several issues that could have a big effect on future licensing and assertion of standard-essential patents. As explained in our previous post “catching up on” the details of this dispute, this appeal follows Judge Posner’s dismissal of both Apple’s and Motorola’s dueling infringement claims, which was based on the parties’ failure to prove entitlement to the remedies sought. Because Motorola had asserted a FRAND-encumbered standard-essential patent against Apple’s UMTS-compliant products, the Federal Circuit is likely to decide at least two issues that may have widespread implications for SEP licensing and litigation for years to come: (1) whether injunctive relief may be an appropriate remedy for Apple’s alleged infringement of Motorola’s FRAND-pledged SEPs; and (2) how to calculate damages for Apple’s alleged infringement of Motorola’s FRAND-pledged SEPs.
Unsurprisingly, many parties have filed amicus briefs with the Federal Circuit that address these issues. The Federal Circuit even extended the deadline for parties to file amicus briefs on the FRAND issues until seven days after Motorola’s opening brief on the FRAND issues is filed (which would currently be no later than March 20, 2013). While still more parties may file amicus briefs over the next two months, we include below a link to each of the briefs filed thus far, along with a brief summary of the positions each has advocated for.
Federal Trade Commission (Amicus Brief):
The FTC filed its amicus brief on December 14, 2012. Given its penchant for submitting public interest statements in ITC cases involving FRAND issues, as well as its then-pending investigation of Google and Motorola Mobility’s SEP-related licensing practices, it was not surprising to see the FTC file a brief here.
In its brief, the FTC focused mainly on its position that it is improper for a party to seek injunctive relief for infringement of a FRAND-encumbered standard-essential patent. The FTC expressed concern that the potential for injunctive relief increases the possibility of patent holders engaging in “hold up,” which can increase costs, deter innovation, and harm consumers. According to the FTC, Judge Posner properly applied the eBay factors in denying Motorola’s request for an injunction — in particular, the FTC agrees that a FRAND assurance means that a patent holder acknowledges that monetary damages are adequate. But the FTC also took the position that the balance of hardships and the public interest weighed against an injunction. Lastly, the FTC dismissed the assertion that injunctive relief might be necessary to “bring Apple to the table” to negotiate,” arguing that such a position is “essence of hold-up.”
Altera, Cisco, CME Group, Garmin, Hewlett-Packard, Logitech, Nest Labs, NETGEAR, Newegg, Rackspace Hosting, Safeway, SAS Institute, Symantec, Wal-Mart, and Xilinx (Amicus Brief):
This brief — authored by a diverse group of companies — focused not on the aspect of injunctive relief, but instead on the method for calculating reasonable royalty damages. Interestingly, these amici did not limit their proposals to the cases where FRAND-encumbered SEPs were involved. Instead, the brief essentially calls for the Federal Circuit to overhaul much of the existing reasonable royalty patent damages jurisprudence.
These amici first argue that the current “generalized methodologies”-based damages regime, stemming from Georgia-Pacific and its progeny, lead to inconsistent and unreliable results that are divorced from the value of the patented inventions at issue. They also claim that under a proper damages scheme, the use of the “entire market value rule” should be presumptively abolished.
The general principles for reasonable royalty patent damages set forth in this amicus brief include: (1) reasonable royalty damages should be capped at the incremental value of the patented invention over the next best existing alternative technology at the time of incorporation into the design of the product (or standard); (2) apportionment — a determination of the value the patented invention provides to the overall accused product — should be used as a starting point in calculating a reasonable royalty; and (3) evidence of an established royalty may be relevant, but only in certain circumstances (such as where hold-up value or litigation avoidance was not a factor in increasing the royalty paid). The amici claim that applying these principles to determinations of a reasonable royalty will lead to more predictable results that appropriately and fairly compensate patent holders.
Verizon Communications, American Association of Advertising Agencies, and Ford Motor Co. (Amicus Brief):
The brief filed on December 27, 2012 by Verizon, the AAAA, and Ford combines the thrust of the two briefs above, plus a little extra. Like the companies above, these amici also suggest the adoption of an “incremental value rule” — that the value of the patent over alternatives existing at the time of design should act as a cap on reasonable royalties — and they argue that injunctive relief is inappropriate for FRAND-encumbered SEPs. But additionally, they further argue that injunctions should not issue for patents that cover only a minor feature or component of a multi-component device (while citing extensively to the Federal Circuit’s recent Apple v. Samsung decision).
Institute of Electrical and Electronics Engineers (IEEE) (Amicus Brief):
Given that IEEE standards are often at issue in SEP disputes (such as Microsoft-Motorola), the amicus brief submitted by the IEEE surely drew a lot of attention from the court and those paying attention to the case. However, those expecting the IEEE to advocate for a particular result were surely disappointed — as is often the case with standard-setting organizations, the IEEE did not take a solid position on the major RAND-related issues before the court. For example, the IEEE did not address the topic of injunctive relief whatsoever. And while the IEEE discussed royalties briefly as part of its discussion of patent hold-up, it did not advocate for any methodology or factors that the court should use to determine what consistutes “RAND terms and conditions” for any particular licensing situation.
The IEEE did, however, provide a long description of the IEEE’s standards-development process, as well as the committment by which the IEEE seeks RAND licensing assurances from participants. The IEEE unequivocally stated that RAND letters of assurance bind not just the submitter but successive owners of the RAND-encumbered patents, and that third parties are entitled to enforce the terms of the letters of assurances.
American Antitrust Institute (AAI) (Amicus Brief):
The American Antitrust Institute, a non-profit think tank, filed a brief that argued against the availability of injunctive relief for RAND-encumbered SEPs. In AAI’s opinion, not only is it improper to seek injunctive relief for infringement of such patents, but such activity might encourage monopolization or attempted monopolization in violation of Section 2 of the Sherman Act. The AAI also argued that the Supreme Court’s eBay decision should be construed as calling for a presumption against the availability of injunctive relief for RAND-encumbered SEPs.
Intellectual Property Law Association of Chicago (Amicus Brief):
The IP Law Association of Chicago focused its brief on a non-SEP-specific issue: the proof required for damages in patent cases. It expressed concern that the bar for expert witnesses is being set too high: damages law is requiring more exactness and specificity, and the cost of presenting a patent damages case is increasing rapidly. In the Association’s opinion, Judge Posner applied too exacting of a Daubert standard in excluding the testimony of Apple’s damage expert.