A new judicial test has likely
established a new commercial standard for determining RAND royalty
rates. The Court of Appeals for the 9th Circuit has
upheld a $14.5M damage award against Motorola for breaching its
obligation to license standard-essential patents on reasonable and
non-discriminatory (RAND terms).
Motorola is the owner of patents
that are essential to the implementation of two common industry
standards1 and had entered agreements with the standard
setting organizations to license these standards essential patents
(SEPs) to all other parties on RAND terms.
Not satisfied with the royalty
rates demanded for the use of the SEPs, Microsoft initiated
litigation alleging that Motorola had breached its RAND obligations
and sought, amongst other issues, damages for over-payment of
patent licensing royalties. In April 2013, Judge James
Robart2 issued a 207 page opinion setting out the
first-ever judicial determination of a RAND royalty rate for SEPs,
and arrived at royalty rates that were significantly lower than
those demanded by Motorola. Based at its core on the
conventional 15-criteria Georgia-Pacific "reasonably
royalty" analysis, Judge Robart's decision analysis
distinguish RAND royalty rates from the "reasonably
royalty" and created a modified framework for determining RAND
terms taking into account SEP and RAND specific factors (industry
benefits, royalty stacking, relative contribution of the patented
feature, etc.). Using the judicially determined RAND rates, a
jury awarded $14.5M in damages to Microsoft. Motorola
On appeal, the Court of Appeals for
the 9th Circuit upheld Judge Robart's ground
breaking analysis. In affirming the analysis and RAND rates
determined at trial, the Court of Appeals, held that the
"Federal Circuit has 'never described the
Georgia-Pacific factors as a talisman for royalty rate
calculations"3 and that "...in determining the
RAND rate and range for each SEP portfolio, the district court
engaged in a thoughtful and detailed analysis, giving careful
consideration to the parties' briefings and evidentiary
submissions, and to the testimony...".4
Having now been endorsed in the
9th Circuit, Judge Robart's RAND analysis may now
serve as roadmap to future litigants and may become the new
"standard" for determining RAND royalty rates in the
future and should be considered "essential" reading for
all SEP owners.
1 ITU H.264 video coding standard and IEEE “Wi-Fi” standard
2 Microsoft Corp. v. Motorola Inc., Western District of Washington
3 Microsoft Corp. v. Motorola Inc., U.S. Court of Appeals for the Ninth Circuit, No. 14-35393, July 30, 2015, at page 31.
4 Microsoft Corp. v. Motorola Inc., U.S. Court of Appeals for the Ninth Circuit, No. 14-35393, July 30, 2015, at page 38-39.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
A recent Saskatchewan Court of Queen's Bench decision allowed a court-appointed receiver to sell and transfer intellectual property rights free and clear of encumbrances, finding that a license to use improvements of an invention was a contractual interest and not a property interest.
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).