Judge Gilstrap recently issued an Order rejecting the equitable defense of patent misuse in a case involving standard essential patents (SEPs) subject to a commitment to license them on fair, reasonable and non-discriminatory (FRAND) terms. Motorola Mobility LLC (Motorola) alleged that Saint Lawrence Communications LLC (St. Lawrence or SLC) was guilty of patent misuse by, among other things, requiring Motorola to take a worldwide license to FRAND-committed SEPs, using the threat of injunctive relief in Germany to coerce licensing of those SEPs, entering different license terms with different licensees and not disclosing effective royalties from licensing the SEPs under a patent pool when negotiating individual licenses. This decision is another indication that competition law claims asserted against SEPs may not prevail when patent owners have followed traditional patent enforcement and licensing strategies or even if they breach of a FRAND commitment. Rather, there must be something more egregious or deceptive with the particular patent owner’s conduct at issue to give rise to competition law claims that are required to address harm to competition beyond harm that can be addressed by more traditional patent or contract law remedies — e.g., a contract remedy for breach of a FRAND commitment or limits on patent remedies based on a FRAND commitment. Continue Reading Judge Gilstrap rejects patent misuse defense to alleged FRAND-committed SEPs (St. Lawrence v. Motorola Mobility)
Judge Gilstrap recently ruled that certain challenges to a damages expert’s testimony went toward the weight a jury could give that testimony, rather than whether the testimony should be admitted. Specific FRAND-related portions of the testimony that he would admit at trial include the following:
- Expert could testify that the hypothetical FRAND royalty rate to be awarded for infringement damages (which presumes the patents are valid and infringed) would be higher than the royalty rate of a comparable FRAND license, which comparable license’s royalty rate may have been skewed low based on discounts made for litigation risks and costs.
- Expert could testify about FRAND royalties that the accused infringer charges for its own SEPs.
- Expert could testify about licenses negotiated in the context of German litigation and threat of injunction.
Judge Gilstrap indicated that the expert had sufficiently identified what he relied on and explained adjustments that he made to those proposed comparable licenses to account for differences from the hypothetical negotiated license. The defendant’s challenges to that testimony goes to the weight the jury should give the testimony, not its admissibility.
Judge Gilstrap’s ruling is an interesting example of how FRAND litigation has matured since taking the main stage in Judge Robart’s first-of-its-kind FRAND royalty decision in Microsoft v. Motorola (see our May 1, 2013 post) and Judge Holderman’s following decision in In re Innovatio (see our Oct. 3, 2013 post). Both of those 2013 decisions were based on, inter alia, a general failure of litigants to present sufficiently comparable licenses. Since then, Federal Circuit decisions have leaned toward admitting comparable licenses where expert testimony sufficiently accounts for differences from the hypothetical negotiated license.
For example, the Federal Circuit’s 2014 Virnetx decision (a non-SEP case) counseled that, although “alleging loose or vague comparability … does not suffice,” a jury may consider comparable licenses where differences from the hypothetically negotiated license are explained to them (see our Sep. 17, 2014 post). And the Federal Circuit’s 2015 Ericsson decision (an SEP FRAND case) stressed that, although real world licenses “are almost never perfectly analogous to the infringement action,” the jury may consider them if expert testimony accounts for “distinguishing facts when invoking them to value the patented invention.” (see our Dec. 5, 2015 post). Litigants following the Federal Circuit’s guidance may find courts more willing to allow expert testimony on proposed comparable licenses despite their differences from the hypothetical negotiated license.
Continue Reading Judge Gilstrap permits damages expert testimony that litigated FRAND royalty should be higher than comparable license’s FRAND royalty that was skewed low by litigation risk discount (St Lawrence v. ZTE)