STANDARD ESSENTIAL PATENTS
definition of a SEP and the attendant RAND commitment may vary based not only on the letters of assurance given by the patent owner, but also the rules governing the SSO adopting the standard, as well as the contract law principles applied by the court (which could vary by state or by country).
Te Innovatio court conducted this analysis before
claim construction and before any
infringement findings, with the expectation that such information could assist the parties in settlement discussions. Other courts may develop alternatives for determining what constitutes an essential patent.
The RAND rate
Another key question in the analysis is what constitutes a RAND rate? In Innovatio, the court noted that “the impact of the RAND obligation is a damages question, [entitling the parties] to a jury determination on the issue”. However, the parties agreed that the court should determine all RAND-related obligations, and a bench trial to determine the RAND rate is set for autumn 2013.
A similar approach was taken in Microsoſt v Motorola, where the district court held a bench trial to determine a RAND licensing rate and a RAND royalty range for Motorola’s patents. In that case, the Microsoſt court set forth a detailed RAND analysis, using a ‘modified’ Georgia Pacific analysis. In particular, the court determined that the modified Georgia Pacific factors should reflect the realities at the time immediately prior to adoption of the standard, rather than at the time of the alleged infringement; that the RAND rate should reflect the incremental value of the patent over the next best technology at the time of adoption of the standard, and that the RAND rate should take into consideration the totality of essential patents bearing on the standard. Application of
these factors had the effect of
downwardly adjusting the licence rate proposed by the patentee manyfold.
A similar rationale was articulated by 7th Circuit Judge Posner in Apple v Motorola, where he recognised the need to “confine the patentee’s royalty demand to the value conferred by the patent
itself as distinct from the additional
value—the hold-up value—conferred by the patent’s being designated as standard-essential”. In order to meet this need, he opined that “Te proper method of computing a FRAND royalty starts with what the cost to the licensee would have been of obtaining, just before the patented invention was declared essential to compliance with the industry standard, a license for the function performed by the patent.” It remains to
“NOTWITHSTANDING STATEMENTS IN THE PATENTEE’S LETTERS OF ASSURANCE DIRECTED TO THE PATENTS GENERALLY, THE SSO BYLAWS MANDATED THAT THE RAND COMMITMENT BE EVALUATED ON A CLAIM-BY-CLAIM BASIS.”
the Office of US Trade Representative (August 3, 2013 in declining to approve an International Trade Commission (ITC) import
ban on
infringing Apple products), have voiced similar opinions through various policy statements, namely that injunctive relief should not be made available for RAND-encumbered SEPs, either in the district court or the ITC, unless the licensee refuses (or is unable) to license on RAND terms, or the licensee is beyond the jurisdiction of the court system.
Under this developing framework, courts will be expected to evaluate not only traditional contract- type questions such as the terms of RAND commitments, but also policy considerations behind RAND commitments. To date,
this
analysis has been applied exclusively to RAND- encumbered SEPs. However, one could envision an argument that extends the analysis to an SEP for which the patentee has no corresponding RAND obligation (eg, the patentee was not a SSO participant) or where the patent, while not essential, derives substantial benefit from or widespread use based on implementation of a common industry standard or practice, or where the patent owner is in the business of licensing patents, such as a PAE. Tat result could have an impact on the potential value of such patents.
Laura Beth Miller is a shareholder at Brinks Hofer Gilson & Lione. She can be contacted at:
lmiller@brinkshofer.com
be seen whether future litigants will leave these questions with the judge or pose some or all of them to a jury.
Te final and perhaps most hotly-contested RAND commitment question involves the right of the SEP owner to obtain injunctive relief, with respected jurists and others recognising an injunction in such cases is “arguably inconsistent with
the RAND licensing commitment”—
Microsoſt v Motorola, 696 F.3d 872 (9th Cir. 2012); see also Apple Inc v Motorola Inc, 869 F. Supp. 2d 901 (N.D. Ill. 2012); Realtek Semiconductor Corp v LSI Corp, 2013 US Dist. Lexis 71311, 2013 WL 2181717 (N.D. Cal. May 20, 2013) (holding that unless the infringer refuses to licence under RAND terms, injunctive relief is not appropriate).
Te US Department of Justice along with the US Patent & Trademark Office (January 8, 2013), the Federal Trade Commission, and most recently
66 World Intellectual Property Review September/October 2013
Laura Beth Miller is a shareholder at Brinks Hofer Gilson & Lione, chair of the ITC practice group and a member of the firm’s litigation practice group. She is a skilled trial attorney with experience in IP law, as well as antitrust and commercial litigation. She focuses her practice on district court litigation and ITC proceedings.
www.worldipreview.com
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