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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…

Big news today in the Microsoft-Motorola RAND breach of contract dispute taking place before the U.S. District Court for the Western District of Washington.  After the November 2012 bench trial and significant post-trial briefing between the parties on a variety of issues, we finally have an order from the court.  However, we will need to…

For those of you unfamiliar with the pace of litigation at the U.S. International Trade Commission, it is fast.  Just several days ago, we were writing about the comments on the public interest submitted in Inv. No. 337-TA-794 by Apple and Samsung, the ITC Staff, and several other interested non-parties.  Late last week, Apple, Samsung, and the ITC staff each submitted responses to these initial public interest comments.

Barring unexpected additional submissions from the parties (e.g., a notice of supplemental authority citing Judge Robart’s forthcoming ruling in the Microsoft-Motorola RAND case, which may come down any day), the briefing in this important ITC case should now be all wrapped up.  Now, the waiting game begins — the Commission has until May 31 decide whether it will issue an exclusion order barring Apple products, should it find that they infringe Samsung’s (alleged) 3G UMTS-essential patent(s) (although a ruling could, of course, come before then).

A round-up of and links to the recent responsive submissions, after the jump…
Continue Reading Public interest briefing wraps up in Samsung-Apple ITC battle (337-TA-794) — parties now play the waiting game on exclusion orders and SEPs

Just like with cellular standards, the widespread use of the IEEE 802.11 wireless networking (“WiFi”) standard often makes WiFi-compliant devices easy targets for patent infringement lawsuits — particularly suits brought by non-practicing entities.  The most infamous of these NPEs targeting WiFi is probably Innovatio IP Ventures LLC, who has accused thousands of businesses of…

(Note: the subject matter of this post is a bit off-topic for this blog, but with all of the attention being paid to non-meritorious patent lawsuits and potential solutions, we thought this warranted mentioning.)

Patent litigation, like most litigation in this country, is generally controlled by the “American Rule” — the general rule that each party pays its own litigation-related costs and attorneys’ fees.  This stands in contrast to the rules in other countries such as England, where the losing party generally pays the other’s attorneys’ fees.  There are exceptions to the American Rule in various jurisdictions and types of litigations, including the patent-related provision in 35 U.S.C. § 285.

Section 285 provides that “[t]he court in exceptional cases may award reasonable attorney fees to the prevailing party.”  However, it’s well-known that courts rarely award fees under Section 285 except in the most egregious circumstances (in fact, we recently posted a patent alert about a denial of fees).  Under current Federal Circuit precedent, cases are only deemed exceptional if there has been litigation misconduct or fraud in securing the patent, or if an infringer’s claim is both objectively baseless and brought in subjective bad faith.  See Highmark, Inc. v. Allcare Health Mgmt. Sys., Inc., 687 F.3d 1300, 1308 (Fed. Cir. 2012).

In a recent petition for certiorari, Octane Fitness LLC has asked the U.S. Supreme Court to overturn this precedent and make it easier for prevailing patent infringement defendants to recover attorneys’ fees from infringement plaintiffs.
Continue Reading Is Section 285’s “exceptional case” requirement too exceptionally hard to satisfy?

Recently Apple explained to the ITC that many of the standard-essential patents asserted by Samsung against Apple have failed under the scrutiny of litigation, resulting in a finding of non-infringement or invalidity.  Well, Apple can now chalk up another SEP win on the board, although one that has nothing to do with Samsung.  Yesterday, Judge Sue Robinson of the U.S. District Court for the District of Delaware ruled on summary judgment that Apple does not infringe two patents alleged by Golden Bridge Technology to be essential to the 3G W-CDMA wireless telecommunications standard.

Golden Bridge is a noted non-practicing entity whose “primary business is the creation, licensing, and enforcement of Wideband CDMA technology and intellectual property.”  The company is involved in several lawsuits over its allegedly-essential cellular technology, and even brought (and lost) an antitrust case against several mobile device makers a few years back, where it had accused the mobile device companies of excluding Golden Bridge’s technology from the standard-setting process.
Continue Reading Delaware court says Apple does not infringe Golden Bridge W-CDMA patents

The standard-essential patent battle between InterDigital and Chinese handset makers Huawei and ZTE rages on in the U.S. District Court for the District of Delaware.  Recall that the parties are awaiting an Initial Determination in ITC Inv. No. 337-TA-800, and are also involved in Inv. No. 337-TA-868.  In the companion district court cases to the -868 investigation, Huawei and ZTE attempted to have the Delaware court expedite a determination of FRAND terms for InterDigital’s portfolio, an attempt that was rebuffed by the court.  But now, in motion filed yesterday, InterDigital seeks to have Huawei and ZTE’s FRAND-related claims dismissed altogether.  InterDigital argues that the FRAND counterclaims should have been asserted in an earlier litigation, are not ripe, and merely seek an advisory opinion.  InterDigital also claims that Huawei and ZTE have failed to allege the existence of an enforceable contractual commitment under the applicable law.
Continue Reading InterDigital asks Delaware court to dismiss Huawei, ZTE’s FRAND counterclaims