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A few months ago, we took note of a dispute in the Southern District of New York between two foreign makers of Universal Serial Bus (USB) products — Lotes and Hon Hai/Foxconn.  You can read our prior post for more background on the dispute, but in summary, Lotes accused Foxconn of reneging on licensing commitments…

As many of you are aware, a non-practicing entity named Innovatio IP Ventures has been engaged in a widespread licensing and litigation campaign over WiFi-related patents that were formerly owned by Broadcom.  As a result, Innovatio has become embroiled in litigation with several suppliers of WiFi-compliant devices (Cisco, Motorola Solutions, Netgear) in the Northern District of Illinois.  A few weeks ago, we noted that a debate had arisen in that case over the “essentiality” of certain asserted patents.  The presiding judge ordered briefing on the issue, and Innovatio filed its “Essentiality Brief” a couple weeks ago — asserting that not all of its asserted claims were essential or covered by IEEE RAND obligations.  This past Friday, the WiFi Suppliers filed their response to Innovatio’s Essentiality Brief.  The WiFi Suppliers accuse Innovatio of misconstruing both the IEEE Patent Policy and the relevant RAND licensing Letters of Assurance in an attempt to avoid its RAND obligations.

[2013.05.10 Defendants’ Brief re Essentiality of Patent Claims]

We alluded in our last post on this matter that issues of patent “essentiality” — and therefore, the scope of corresponding RAND obligations — are likely to become a more common issue in standard-essential patent litigation.  The WiFi Suppliers’ responsive brief demonstrates why.Continue Reading Scope of IEEE RAND obligations a hotly-contested issue in Innovatio IP Ventures WiFi patent litigation

Late Friday, Microsoft responded to the letter brief filed by Motorola last week in the parties’  RAND breach of contract case.  In its responsive letter brief [LINK], Microsoft disputes Motorola’s versions of the facts, and contends that Motorola has long known about the bases on which Microsoft would be seeking damages for breach of contract.  In particular, Microsoft claims that Motorola has known for over a year that Microsoft would be seeking to recover the costs of moving its EMEA distribution center from Germany to the Netherlands.  Microsoft suggests that Motorola’s efforts to limit Microsoft’s damages theories are nothing but a pretext for Motorola to actually dismiss Microsoft’s claims for damages for breach of contract.
Continue Reading RAND damages discovery dispute continues – Microsoft says Motorola’s brief is a pretext to dismiss damages claim

The district court in the Microsoft-Motorola RAND breach of contract case has already decided some unique issues of first impression, and will take on some more in the next phase of the case.  And if the parties don’t settle, an appeal is likely to follow.  This raises an interesting question, one that doesn’t necessarily have a clear answer — which appellate court would have jurisdiction over an appeal of Judge Robart’s RAND-related rulings?

The Western District of Washington sits within the 9th Circuit Court of Appeals (which, as noted below, has already heard an interlocutory appeal in this case).  But as you may know, in order to preserve uniformity in patent law, the U.S. Court of Appeals for Federal Circuit in Washington, DC is the court designated by Congress as the appeals court with exclusive jurisdiction for nearly all patent cases.  The Microsoft-Motorola case (at least the part which has garnered the most attention) involves a breach of contract issue relating to patents, standard-setting, and patent licensing issues.  So, which is it — the 9th Circuit or the Fed Circuit?

Brace yourselves – this will take a couple thousand words.


Continue Reading Which appeals court has appellate jurisdiction over the Microsoft-Motorola RAND case?

Last week we covered the dispute between Innovatio IP Ventures and Cisco, Motorola Solutions, and NETGEAR (the “WiFi Suppliers”) over the essentiality and non-essentiality of various 802.11-related patent claims asserted by Innovatio.  The WiFi suppliers argued that all of Innovatio’s asserted patents were essential to the 802.11 family of wireless networking standards, and therefore subject to IEEE RAND obligations.  For its part, Innovatio disputed whether dozens of claims were in fact essential.

Late last week, Innovatio filed a brief supporting its arguments regarding the non-essentiality of certain asserted claims [LINK].  Innovatio argues that the WiFi Suppliers fail to apply the IEEE’s Patent Policy in making their determination of essentiality, rendering their contentions incorrect.Continue Reading Innovatio argues that WiFi Suppliers misinterpret IEEE definition of “essentiality,” scope of RAND obligations

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…

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