Earlier today we summarized the amicus brief filed by Intel in the Apple v. Motorola Federal Circuit appeal, and we noted that a number of other not-yet-publicly-available amicus briefs were also filed with the court. Today, the amicus brief filed by Qualcomm hit the docket — and out of all of the recent amicus briefs, it’s the only one that was expressly filed in support of Motorola.
As it has consistently argued in the past, Qualcomm — a holder of a significant portfolio of SEPs — argues here that a FRAND commitment does not categorically preclude injunctive relief, and it urges the Federal Circuit to refrain from adopting such a rule. Qualcomm also argues against the particular methodologies of calculating reasonable royalty damages for both FRAND-pledged essential patents and non-essential patents (e.g., the so-called ex ante or incremental value rules) that certain amici have advocated for.
Qualcomm makes its arguments regarding the availability of injunctive relief both in terms of broader policy arguments, as well as with respect to the particular application of the eBay factors to FRAND-encumbered SEPs (such as the Motorola patent at issue here).
Just as it did in its public comments to the FTC on the Google consent decree, Qualcomm argues here that there is no basis for a categorical exclusion of injunctive relief on standard-essential patents subject to FRAND obligations. It argues that any such categorical rule would violate the Supreme Court pronouncement in eBay (echoing arguments made in Motorola’s brief). Qualcomm states that the availability of injunctive relief should instead be evaluated on a case-by-case basis by applying the eBay factors and examining the actions of the parties and the particular language of the contractual FRAND agreements that the SEP holder has entered into.
Qualcomm also addresses the concerns raised by Apple and many amici about patent hold-up. According to Qualcomm, “there is a decided lack of evidence that any ‘hold up’ problem actually exists” — pointing to a purported inability of experts in the Microsoft-Motorola RAND case to identify any cases of licenses resulting from patent hold-up. Qualcomm argues that a categorical ban on injunctions would be especially inappropriate in light of such a lack of evidence of actual patent hold-up. In any event, says Qualcomm, courts are well-equipped to use the eBay factors to eliminate injunctive relief should patent hold-up be found to occur in any particular case.
Speaking of the eBay factors, Qualcomm agrees with Motorola that Judge Posner did not properly apply these factors in this case, and that this by itself warrants reversal. In Qualcomm’s opinion, a court properly applying the eBay factors might very well find that a given SEP case warrants an injunction (although Qualcomm takes no position on the specific outcome here). Qualcomm argues that despite FRAND obligations, a FRAND royalty is not always an “adequate remedy,” such as in cases where an infringer refuses to enter into a FRAND license and serially infringers (i.e., “reverse hold-up” or “hold-out”). As Qualcomm puts it, “absent the threat of injunctive relief where warranted under eBay, a licensee may have little incentive to negotiate in good faith” — potentially leading to increased litigation and licensing costs across the board. Qualcomm also argues that removing the possibility of injunctive relief may lead to decreased participation in standard setting activities and limited availability of certain technology for the public.
Qualcomm also dedicates a few pages of its to oppose a proposal from a diverse group of amici companies (Altera, Cisco, CME Group, Garmin, HP, Logitech, and several others) for the proper methodology of calculating reasonable royalty damages in patent infringement cases. We previously discussed this proposal in our earlier round-up of amicus briefs, but here’s a brief recap — these amici argue that reasonable royalty damages for all patents, not just FRAND patents, should be capped at the “incremental value of the patented invention over the next best alternative” at the time of design of the accused product. Note that Intel also provides a similar “incremental contribution” argument in its amicus brief.
Qualcomm argues first that the Federal Circuit should not even bother to address this issue, as Judge Posner did not discuss the incremental value of the patent in his decision below. However, Judge Posner did state that he considered a starting basis for computing a FRAND royalty to be the cost of obtaining a license to the patent just before incorporation of the standard — what he deemed “the value of the patent qua patent.” This appears to be at least arguably similar to the incremental value/contribution standards argued for by the amici.
But Qualcomm also says that even if the Federal Circuit does address this issue, it should reject the incremental value standard as unworkable and inconsistent with precedent. Qualcomm cites the Federal Circuit’s 2008 holding in Mars v. Coin Acceptors, where the court rejected the notion of capping reasonable royalty damages at the cost of implementing the cheapest non-infringing alternative, as well as other cases. Qualcomm also agrees with Motorola that the incremental value rule is inconsistent with the established Georgia-Pacific methodology of calculating reasonable royalties — under which damages are calculated at the time infringement began, not at the time of design (or contribution to a standard). Qualcomm warns that adopting such a rule would appropriate the value of inventions from patent holders, discouraging future risk-taking in invention and innovation.