2013

In the aftermath of last week’s Microsoft-Motorola RAND-setting opinion, the case will now to proceed toward an August trial date.  At this trial — if it gets that far — either Judge Robart or a jury (this issue is still up in the air) will determine (1) whether Motorola breach its RAND obligations to the IEEE and ITU; (2) if a breach has occurred, whether Microsoft is entitled to damages as a result; and (3) the amount of any damages owed.  As we’ve noted before, Microsoft will likely seek summary judgment prior to trial, given the difference between Motorola’s opening 2.25% offer and the final RAND royalty rate set by Judge Robart.  But either way, the issues of breach of contract and potential damages remain in the case, and the parties are currently taking some limited discovery on these issues.

Yesterday, Motorola filed a letter motion with the court [LINK], asking it to limit the theories on which Microsoft may base its damages claims.  Motorola asserts that in recent weeks, Microsoft has significantly (and improperly) expanded its damages contentions in violation of the Federal Rules of Civil Procedure, prejudicing Motorola’s ability to prepare its own case.Continue Reading Motorola asks Washington court to limit Microsoft’s theories of damages for potential RAND breach

By now many of you have at least skimmed through Judge James L. Robart’s 207-page order setting RAND royalty terms for an 802.11- and H.264-essential patent license agreement between Motorola and Microsoft.  You may have noticed that there’s no table of contents (despite the opinion’s considerable length) — and who has the time to sift…

While InterDigital continues to press its claims of 3G- and 4G-essential patent infringement in the International Trade Commission against Huawei, Nokia, Samsung, and ZTE (Inv. No. 337-TA-868), the companies have also been fighting about FRAND-related issues in Delaware, where some of defendants have asserted FRAND-related counterclaims against InterDigital.  A few weeks back, we noted InterDigital had asked the court to dismiss Huawei and ZTE’s FRAND counterclaims, arguing that they were not ripe and were not properly pleaded, among other reasons.  Last Thursday, Huawei and ZTE filed their opposition to the motion to dismiss [LINK].
Continue Reading Huawei, ZTE tell Delaware court that their FRAND claims against InterDigital should not be dismissed

Much of the activity and attention in the standard-essential patent world over the last few days has been focused on Judge James L. Robart’s groundbreaking decision in the Microsoft-Motorola RAND breach of contract case.  But that wasn’t the only RAND-related bit of news happening this past Thursday — that same day, in the Federal Circuit, Apple filed its response to Motorola’s appeal of Judge Posner’s decision to deny both damages and injunctive relief to Motorola in a case involving Apple’s alleged infringement of Motorola standard-essential patents.

Due to the fact that the Federal Circuit has consolidated appeals by both parties, Apple’s brief is technically both a response brief and a reply brief — but we will only deal with the SEP-specific issues here.  In the brief, which we’ll delve into after the jump, Apple urges the Federal Circuit to uphold Judge Posner’s findings that, even if infringement could be proven: (1) Motorola failed to introduce a cognizable damages theory for infringement of the SEPs at issue; and (2) Motorola could not show entitlement to injunctive relief for its FRAND-encumbered patents.

Link: [Apple April 25, 2013 Appellate Brief]Continue Reading Apple asks Federal Circuit to affirm Judge Posner’s denial of injunctive relief and damages for Motorola FRAND-pledged standard-essential patents

As we noted yesterday, Judge James L. Robart’s groundbreaking opinion in the Microsoft v. Motorola breach of contract case was the first to set RAND licensing terms for a standard-essential patent portfolio.  While much of the focus in the media has been on the amount of RAND royalties determined by the court, it’s the methodology for determining these royalties has the potential to be truly important for future cases

To determine RAND terms in this case, Judge Robart analyzed what would occur in a hypothetical negotiation between Motorola and Microsoft for the 802.11- and H.264-essential portfolios at issue.  As in many patent-related cases, the court here used the factors outlined in Georgia-Pacific Corp. v. U.S. Plywood Corp., 318 F. Supp. 1116 (S.D.N.Y. 1970) formed the basis for this hypothetical negotiation.  But to account for the unique considerations present in the standard-essential patent RAND licensing context, Judge Robart modified the G-P factors somewhat — noting that “the parties in a hypothetical negotiation would set RAND royalty rates by looking at the importance of the SEPs to the standard and the importance of the standard and the SEPs to the products at issue.”  After the jump, we will take a closer look at Judge Robart’s modified Georgia-Pacific approach to determining RAND royalties.
Continue Reading Microsoft-Motorola follow-up: A look at Judge Robart’s modified Georgia-Pacific RAND methodology

Today, Judge James L. Robart issued the non-confidential version of his Findings of Fact and Conclusions of Law in Microsoft Corp. v. Motorola, Inc., No. 10-cv-1823 (W.D. Wash.).  This marks the first time that a U.S. court has made a determination of RAND licensing terms for a standard-essential patent portfolio license between two parties.  The order itself is 207 (!) pages long, so it will take some time to review, and multiple posts to fully digest.  But we wanted to do a short post this evening, and will follow up with a more in-depth review tomorrow.

To recap, the SEP portfolios at issue here are (1) Motorola’s patents that are claimed to be essential to the IEEE 802.11 wireless networking standard, and (2) Motorola’s patents that are claimed to be essential to the ITU-T H.264 video coding standard.  Judge Robart, in fact, determined both a specific RAND royalty rate and a RAND royalty range for these portfolios, noting that “more than one rate could conceivably be RAND.”  Here are his findings:

  • The RAND royalty rate for Motorola’s H.264 SEP portfolio is 0.555 cents per unit; the upper bound of a RAND royalty range for Motorola’s H.264 SEP portfolio is 16.389 cents per unit; and the lower bound is 0.555 cents per unit. This rate and this range are applicable to both Microsoft Windows and Xbox products. For all other Microsoft products using the H.264 Standard, the royalty rate will be the lower bound of 0.555 cents.
  • The RAND royalty rate for Motorola’s 802.11 SEP portfolio is 3.471 cents per unit; the upper bound of a RAND royalty range for Motorola’s 802.11 SEP portfolio is 19.5 cents per unit; and the lower bound is 0.8 cents per unit. This rate and range is applicable to Microsoft Xbox products. For all other Microsoft products using the 802.11 Standard, the royalty rate will be the low bound of 0.8 cents per unit.

That’s about 4 cents/unit total — and even at the upper bounds, it’s about 36 cents/unit.  From a review of the parties’ post-trial briefs (Motorola, Microsoft), these RAND royalty rates are much closer to the ones urged by Microsoft than Motorola.  And obviously, they are much lower than the 2.25% rates offered by Motorola in its initial licensing letters (which work out to about $4.50 on a $199 Xbox).  Judge Robart apparently did not find Motorola’s prior licenses (many of which involved Motorola’s cellular SEP portfolios) to be good comparables for a license between Motorola and Microsoft involving 802.11 and H.264 patents.  Instead, he appears to have based much of his determinations on rates offered by patent pools (the MPEG LA AVC/H.264 pool and the Via Licensing 802.11 pool), as well as license rates charged by chip designer ARM Holdings.

“Economic Guideposts” for assessing RAND terms

Beyond the actual RAND royalty rate determinations, this order is also important for the precedent it sets in how to determine RAND terms for a patent portfolio.  On pp.25-26, Judge Robart lays out what he terms several “economic guideposts”:

  • The level of a RAND royalty should promote adoption of the standard;
  • The methodology for determining RAND terms should recognize and mitigate both the risk of “patent hold-up” and royalty stacking (the total royalties payable if other SEP holders made the same demands);
  •  RAND royalties should guarantee the patent holder a reasonable return on its IP-related investment; and
  • RAND royalties should be interpreted to limit the patent holder to a reasonable royalty on the economic value of the patented technology itself, apart from the value associated with the patent’s incorporation into an industry standard (similar to Judge Posner’s idea of the value of the “patent qua patent”)

One interesting thing about the findings is that while the ultimate RAND royalty appears to favor Microsoft, Judge Robart seems to have sided with Motorola as to the right approach to determine RAND royalties — simulating a hypothetical, bilateral negotiation between the parties (whereas Microsoft had suggested determining RAND on the basis of an ex ante, multilateral negotiation at the time of the standard’s adoption).

We will get into the meat of Judge Robart’s analysis tomorrow — given the importance (and length) of Judge Robart’s order, it’s certainly worth multiple posts.  Stay tuned for an update tomorrow, but in the meantime, happy reading.

And if you’d like to catch up on the history of the Microsoft-Motorola case,
Continue Reading Microsoft-Motorola Update: Washington court sets RAND royalty for Motorola 802.11 and H.264 patent portfolios

Two weeks ago we noted a slew of infringement lawsuits brought by Wyncomm LLC, a non-practicing entity, against dozens of companies over a WiFi-related patent that was formerly owned by AT&T.  Today, yet another NPE accused multiple companies of infringing WiFi-related patents that used to belong to an telecommunications company.  This time, the NPE is an entity named Innovative Wireless Solutions LLC (“IWS”), and the patents it is asserting were originally owned by Northern Telecom (later Nortel Networks).  Unlike Wyncomm, who filed in Delaware, IWS filed its suits in the Eastern District of Texas.  And instead of targeting a number of hardware manufacturers like Apple and Asus, IWS filed suit against a variety of hotel chains large and small, including Marriott, Starwood, Wyndham and Grayson Hospitality.  (Hotel chains were also a popular target for Innovatio IP Ventures, another NPE asserting WiFi-related patents).  An example of one of the complaints filed today by IWS (against Marriott) may be viewed here.

[UPDATE] Since we first posted this, many more complaints filed by Innovative Wireless Solutions have come to light.  The defendants include not just hotels, but also other businesses such as coffee and sandwich shops (again, apparently taking a page right out of Innovatio’s playbook).  The full list of defendants, which is available after the jump, has been updated to reflect these other suits. [/UPDATE]Continue Reading Innovative Wireless Solutions LLC accuses hotels (and others) of infringing WiFi/Ethernet patents formerly owned by Nortel

An issue that often comes up in standard-essential patent litigation is “essentiality” — whether the asserted claims are actually necessary to practice the technological standard that forms the basis of the infringement allegations.  This is important for at least two reasons: first, because if the claim is not actually necessary to practice the standard, an implementer could (at least theoretically) design around the patent to create a non-infringing implementation of the standard; and second, because the RAND obligations set forth in the patent policies of many SSOs are often limited only to truly “essential” patent claims.

This issue of essentiality has come to the forefront in the ongoing multidistrict litigation between non-practicing entity Innovatio and several WiFi suppliers (Cisco, Motorola Solutions, and Netgear).  You may recall that Innovatio, in winning (in part) a motion to dismiss some unfair competition and RICO claims, had argued that many of the asserted claims are not actually “Essential Patent Claims” as defined by the IEEE — and therefore cannot be subject to any existing RAND obligation.  Earlier this month, the court ordered the parties to meet and confer and submit a joint statement regarding disputes over whether, based on Innovatio’s infringement contentions, the asserted claims of Innovatio’s patents are actually essential to the IEEE 802.11 wireless networking standard.  Yesterday, the parties submitted their stipulation regarding the essentiality of Innvatio’s asserted patent claims.
Continue Reading Innovatio, WiFi suppliers clash over over “essentiality” of Innovatio 802.11 patents

Earlier this month we covered InterDigital’s efforts to dismiss Huawei and ZTE’s FRAND counterclaims, which were asserted against InterDigital in litigations in the U.S. District Court in Delaware.  Yesterday, InterDigital filed another motion to dismiss FRAND-related counterclaims in a different Delaware district court litigation — this time, InterDigital seeks to have Nokia’s FRAND counterclaims…