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Ninth Circuit Rules on Standards-Essential Patent Royalties

 

The Ninth Circuit Court of Appeals ruled that the low licensing rate that Microsoft pays to use some of Google’s Motorola Mobility patents was proper.

Microsoft sued in 2010, claiming that Motorola had breached its obligation to offer wireless and video patents used in MS Windows and Xbox game consoles on “reasonable and non-discriminatory” (RAND) terms.

The Circuit Court found that a district court properly determined the royalty rate, even though it was only a fraction of what Motorola wanted.

The court also upheld a $14.5 million award to Microsoft for Motorola’s breach of its contractual obligations.

Reasonable Terms

Circuit Judge Berzon explained RAND terms as follows:

We live in an age in which the interconnectivity of a wide range of modern technological products is vital. To achieve that interconnection, patent-holders often join together in compacts requiring licensing certain patents on reasonable and non-discriminatory (“RAND”) terms. Such contracts are subject to the common-law obligations of good faith and fair dealing.

For example, noted the judge,

When we connect to WiFi in a coffee shop, plug a hairdryer into an outlet, or place a phone call, we owe thanks to standard-setting organizations (“SSOs”). [cite] SSOs set technical specifications that ensure that a variety of products from different manufacturers operate compatibly. Without standards, there would be no guarantee that a particular set of headphones, for example, would work with one’s personal music player.

A jury previously determined that Motorola had breached its RAND and good faith and fair dealing obligations toward Microsoft.

In a bench trial before the jury trial, a district court judge determined what the RAND licensing rate for the patents should be.

The case is Microsoft Corp. v, Motorola, Inc. et al.

Takeaway

Motorola had argued that the district court’s analysis was contrary to Federal Circuit precedent on patent infringement damages and the determination of reasonable royalties. The decision shows that federal courts will apply a flexible, fact-specific, and multi-factor approach in determining royalty rates in cases involving standards-essential patents licensed under RAND terms.

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Photo Attribution: “Motorola PEBL.” Licensed under CC BY-SA 2.5 via Wikimedia Commons .


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