Judge James L. Robart

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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

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…

A couple of weeks ago, we noted a peculiar minute order emanating from Judge James L. Robart’s courtroom in the Microsoft-Motorola RAND case.  Based on his review of Google’s AVC/H.264 standard-essential patent pool license agreement with MPEG LA, Judge Robart asked the parties to submit short letter briefs addressing two questions regarding the relevance of the Enterprise License provision (Section 3.1.7) to any grantback license that Motorola (as a subsidiary of Google) might owe to Microsoft.

Late Friday, the parties submitted their respective answers to the court’s questions (Microsoft’s / Motorola’s).  The parties’ answers and arguments show just how millions of dollars in royalties could turn on the interpretation of just a couple of short phrases in the MPEG LA agreement.  After the jump, we’ll provide a short summary of both Microsoft’s and Motorola’s positions.  Essentially, though, the parties’ arguments boil down to this — Was the MPEG LA agreement’s grantback provision designed to extend to all affiliates of a given licensee, whether those affiliates receive any benefits under the agreement or not?Continue Reading Microsoft, Motorola submit final arguments to Washington court on the relevance and effects of Google-MPEG LA AVC/H.264 agreement to a Microsoft-Motorola RAND license

Even though the trial in the Microsoft-Motorola RAND dispute took place over three months ago, there’s been a lot going on in Washington lately.  In addition to the arguments regarding the relevance of the Google-MPEG LA AVC/H.264 patent license agreement, recall that a couple weeks ago, Judge James L. Robart granted Motorola’s request to submit additional information that may be relevant to determining the RAND rate.  Late Friday, both Motorola and Microsoft filed these documents with the court — documents that may actually raise more issues than they help resolve (and may ultimately have no bearing on Judge Robart’s decision).
Continue Reading Microsoft-Motorola RAND case update: Microsoft accuses Motorola of violating the Google/FTC consent decree, and a potential H.264 license agreement in Germany

Last week, Judge James L. Robart briefly reopened the trial record in the Microsoft-Motorola RAND breach of contract case, in order to allow the parties to submit additional evidence regarding the RAND rate for Motorola’s patents.  Yesterday, Judge Robart issued another short minute order, this time allowing additional briefing on a different issue.  Yesterday’s order concerns the terms of Google’s license with the MPEG LA AVC/H.264 patent pool, which Microsoft claims are dispositive of the appropriate RAND rate for Motorola’s H.264 patents.  (For more background on this particular issue, see our earlier post on the parties’  briefing leading up to oral arguments.).  Judge Robart has now allowed the parties to submit letter briefs of up to six pages by March 1 in light of certain “novel arguments” regarding the MPEG LA agreement that were apparently raised by the parties at the January 28 oral argument.
Continue Reading Microsoft-Motorola judge orders additional briefing on how Google-MPEG LA license agreement may affect RAND terms for Motorola’s H.264 patents

  • Yesterday, President Obama held an hour-long Google hangout to White Housetake questions from the public, and the topic of patents came up.  He answered a question about non-practicing entities and startups, and acknowledged that the America Invents Act “only went about halfway” to full patent reform.  (via Patent Progress)
  • Judge James L. Robert issued

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Yesterday Apple filed its opposition to Motorola’s motion to dismiss or transfer for lack of jurisdiction in Federal Circuit appeal No. 2013-1150.  This is Apple’s appeal of Judge Crabb’s dismissal of the Apple-Motorola FRAND/antitrust action (W.D. Wis. No. 3:10-cv-00178)).  Apple contends that the Federal Circuit has jurisdiction over Apple’s appeal of the dismissal of its declaratory judgment claims because (1) the hypothetical Motorola complaint at which Apple’s declaratory judgment claim was directed would be for patent infringement, and (2) the district’s court’s decision to dismiss the patent-specific DJ claims without prejudice does not deprive the Federal Circuit of jurisdiction.  As we anticipated in our post on Motorola’s motion to dismiss/transfer, some of Apple’s arguments in its opposition raise some interesting questions about whether jurisdiction over this appeal will be consistent with past and potential future appeals of orders in the Microsoft-Motorola RAND case.
Continue Reading Apple: Federal Circuit has exclusive jurisdiction over Apple-Motorola FRAND/antitrust appeal

gavelIn an order issued yesterday by the U.S. District Court for the Western District of Washington (that just hit the docket this afternoon), Judge James L. Robart granted Microsoft’s long-pending motion for partial summary judgment and invalidated thirteen claims of three patents Motorola alleged as essential to the AVC/H.264 video coding standard.  Although this ruling stems from the infringement portion of the case, and the major issues between the parties involve the RAND breach of contract claims brought by Microsoft over Motorola’s entire 802.11 and H.264-essential patent portfolios, it’s possible that Judge Robart’s ruling could have some future effect on these RAND claims as well.
Continue Reading Microsoft-Motorola (W.D. Wash.) update: Court invalidates several claims of Motorola H.264-essential patents

[UPDATE]  Since this post was originally published on January 22, the deadline passed for the parties to submit extrinsic evidence and additional arguments supporting their respective interpretations of the Google-MPEG LA AVC/H.264 license agreement.  Microsoft submitted both a brief and a supporting Declaration of Lawrence A. Horn, who is the President and CEO of MPEG LA, LLC.  Mr. Horn’s declaration supports Microsoft’s argument (as detailed in our original post below) that the scope of the grant-back under the MPEG LA license agreement extends to all Affiliates of Google, not just to those specifically identified.  For its part, Motorola argues that the “scope” language of the MPEG LA agreement remains ambiguous, and that Mr. Horn’s declaration represents inadmissible hearsay because Motorola was unable to cross-examine him.

The parties’s respective briefs and Mr. Horn’s declaration may be accessed from the links below:

[/UPDATE]

Judge Robart’s forthcoming opinion in the Microsoft v. Motorola RAND breach of contract case in the Western District of Washington is highly anticipated by those who pay attention to standard-essential patent disputes, as it will likely provide a judicially-sanctioned roadmap for how to determine RAND terms and conditions in a given licensing situation.  But before he issues a written decision, a hearing is scheduled for January 28, during which Judge Robart will hear oral argument from Microsoft and Motorola regarding the implications that Google’s AVC/H.264 patent pool license agreement with MPEG-LA may have on the appropriate RAND terms for Motorola Mobility’s H.264-essential patent portfolio. (Google, of course, being the parent company of Motorola Mobility since it acquired Motorola in May 2012).


Continue Reading Preview: Motorola, Microsoft set to debate relevance of Google’s MPEG LA license agreement to RAND terms next week