Today the Federal Circuit issued its long-awaited decision in the appeal from Judge Posner’s ruling that denied both Motorola and Apple damages and injunctive relief in Apple v. Motorola. Among other things, the Federal Circuit ruled that there is no per se rule that prohibits a party from seeking injunctive relief on a standard essential patent (SEP) that is subject to an agreement to license the patent on fair, reasonable, and non-discriminatory terms (RAND), stating:
To the extent that the district court applied a per se rule that injunctions are unavailable for SEPs, it erred. While Motorola’s FRAND commitments are certainly criteria relevant to its entitlement to an injunction, we see no reason to create, as some amici urge, a separate rule or analytical framework for addressing injunctions for FRAND-committed patents. The framework laid out by the Supreme Court in eBay, as interpreted by subsequent decisions of this court, provides ample strength and flexibility for addressing the unique aspects of FRAND committed patents and industry standards in general. A patentee subject to FRAND commitments may have difficulty establishing irreparable harm. On the other hand, an injunction may be justified where an infringer unilaterally refuses a FRAND royalty or unreasonably delays negotiations to the same effect. To be clear, this does not mean that an alleged infringer’s refusal to accept any license offer necessarily justifies issuing an injunction. For example, the license offered may not be on FRAND terms. In addition, the public has an interest in encouraging participation in standard-setting organizations but also in ensuring that SEPs are not overvalued. While these are important concerns, the district courts are more than capable of considering these factual issues when deciding whether to issue an injunction under the principles in eBay.
Nevertheless, the Federal Circuit affirmed the denial of injunctive relief on Motorola’s SEP given not only the FRAND commitment, but the large number of licensed industry participants that demonstrates that money damages adequately compensate for the infringement and that Motorola was not irreparably harmed by Apple’s infringement, stating:
Applying those principles [quoted above] here, we agree with the district court that Motorola is not entitled to an injunction for infringement of the ‘898 patent [an SEP]. Motorola’s FRAND commitments, which have yielded many license agreements encompassing the ‘898 patent, strongly suggest that money damages are adequate to fully compensate Motorola for any infringement. Similarly, Motorola has not demonstrated that Apple’s infringement has caused it irreparable harm. Considering the large number of industry participants that are already using the system claimed in the ‘898 patent, including competitors, Motorola has not provided any evidence that adding one more user would create such harm. Again, Motorola has agreed to add as many market participants as are willing to pay a FRAND royalty. Motorola argues that Apple has refused to accept its initial licensing offer and stalled negotiations. However, the record reflects that negotiations have been ongoing, and there is no evidence that Apple has been, for example, unilaterally refusing to agree to a deal. Consequently, we affirm the district court’s grant of summary judgment that Motorola is not entitled to an injunction for infringement of the ‘898 patent.
Judge Rader dissented on this point, asserting that there was a genuine factual dispute whether Apple was an unwilling licensee, stating:
To my eyes, the record contains sufficient evidence to create a genuine dispute of material fact on Apple’s posture as an unwilling licensee whose continued infringement of the ‘898 patent caused irreparable harm. Because of the unique and intensely factual circumstances surrounding patents adopted as industry standards, I believe the district court improperly granted summary judgment. Therefore, on this narrow point, I respectfully dissent in part.
Judge Rader found that untangling the value of the patent from the value of being in a standard as well as issues of patent “holdup” versus “hold out” were complex factual issues not likely susceptible to summary judgment, stating:
At the outset, a patent adopted as a standard undoubtedly gains value by virtues of that adoption. This enhancement complicates the evaluation of the technology independent of the standardization. By the same token, the standardization decision may also simply reflect and validate the inherent value of the technology advance accomplished by the patent. Untangling these value components (at the heart of deciding whether a putative licensee was “unwilling” to license, and thus irreparable harm and other injunction factors) requires intense economic analysis of complex facts. In sum, right from the theoretical outset, this question is not likely to be susceptible to summary adjudication.
Market analysts will no doubt observe that a “hold out” (i.e., an unwilling licensee of an SEP seeking to avoid a license based on the value that the technological advance contributed to the prior art) is equally as likely and disruptive as a “hold up” (i.e., an SEP owner demanding unjustified royalties based solely on value contributed by the standardization). These same complex factual questions regarding “hold up” and “hold out” are highly relevant to an injunction request. In sum, differentiating “hold up” from “hold out” requires some factual analysis of the sources of value–the inventive advance or the standardization.
The record in this case shows evidence that Apple may have been a hold out. This evidence alone would create a dispute of material fact.
More important, the district court made no effort to differentiate the value due to inventive contribution from the value due to standardization. Without some attention to that perhaps dispositive question, the trial court was adrift without a map, let alone a compass or GPS system. In fact, without that critical inquiry, the district court could not have properly applied the eBay test as it should have.
Instead of a proper injunction analysis, the district court effectively considered Motorola’s FRAND commitment as dispositive by itself: “Motorola committed to license the ‘898 to anyone willing to pay a FRAND royalty and thus implicitly acknowledged that a royalty is adequate compensation for a license to use that patent. How could it do otherwise?” To the contrary, Motorola committed to offer a FRAND license, which begs the question: What is a “fair” and “reasonable” royalty? If Motorola was offering a fair and reasonable royalty, then Apple was likely “refus[ing] a FRAND royalty or unreasonably delay[ing] negotiations. In sum, the district court could not duck the question that it did not address; was Motorola’s FRAND offer actually FRAND?
Judge Rader, therefore, would have allowed Motorola to prove that Apple was an unwilling licensee and entitled to injunctive relief.