United States: Apportioning For The Standard When Valuing Standards-Essential Patents

Commonwealth Scientific and Industrial Research Organisation (CSIRO), a national research organization of Australia, recently filed a petition for certiorari with the Supreme Court. CSIRO presents the following question: Is the Federal Circuit's promulgation of rigid legal rules to control the weight to be given by the trier of fact to evidence of patent infringement damages proper under 35 U.S.C. § 284?1


CSIRO owns U.S. Patent No. 5,487,069 (the '069 patent), which covers technology designed to solve the problem of multipath interference in wireless communications.2 The '069 patent was incorporated into several of the 802.11 series of wireless communication standards, including 802.11a and 802.11g.3 CSIRO initially agreed to license the '069 patent on reasonable and nondiscriminatory (RAND) terms during the 802.11a standardization process, but repeatedly refused related requests for future iterations of the standard.4 In the past several years, CSIRO has enforced the '069 patent in litigation, including against Cisco Systems, Inc. (Cisco). Cisco eventually stipulated to validity and infringement, and the court determined a reasonable royalty chart after a bench trial based on sales volume and brand ranging from $0.60 per Wi-Fi product to $1.90 per Wi-Fi product.5

On appeal, the Federal Circuit vacated the district court's damages award for two reasons: basing the royalty rate on the wireless product rather than the smallest salable patent-practicing unit, and failing to adjust the Georgia-Pacific factors to account for the '069 patent's status as essential to several wireless communications standards.6 The Federal Circuit discussed the damages-limiting principle of apportionment to support both reasons.7 CSIRO challenges the Federal Circuit's apportionment-based decision in its petition for certiorari, requesting that the Court recognize wide discretion for the district courts to determine damages.8


Under prevailing law, in the context of multicomponent products, apportionment attempts to value only the patented features of the multicomponent product.9 To this end, courts exercise their gatekeeping function under Daubert to exclude damages theories that fail to pin down "the incremental value that the patented invention adds to the product."10 This is often accomplished by basing a reasonable royalty rate on the smallest salable patent-practicing unit. This model limits both the likelihood that a patentee will be compensated for unpatented features of a product and the risk of misleading the jury by overemphasizing the end product.11 One exception to this principle is the entire market value rule, which allows a court to base a reasonable royalty rate on the end product when the patentee proves that the patented invention drives the demand for the end product.12 The district court awarded CSIRO damages based on Cisco's end Wi-Fi products rather than on the wireless chip included in those products.

Recently, the apportionment principle has taken an evolved meaning in the developing realm of standardized technologies. Complex standards can involve thousands of discrete, patented technologies.13 In the standards-setting context, apportionment requires a court to account for the value of the standard itself to ensure that the value of the standard is not awarded to an inventor of only one part of the standard.14 Here, applying its recent Ericsson decision, the Federal Circuit held that the district court failed to account for the value of the 802.11 series of standards before awarding CSIRO its royalty.15 These two legal errors – using an improper royalty base and failing to account for the value of the standard – warranted vacatur of the damages award.


CSIRO's petition argues that this entire regime is flawed under § 284, which, by its terms, sets a royalty floor but not a ceiling.16 CSIRO criticizes the Federal Circuit for fashioning a "rigid legal rule for all cases" based on observations of what may be typical of patents incorporated into standards and the perceived likelihood of granting the patentee a disproportionate damages award.17 CSIRO grounds its petition in the text of § 284, which states that "the court shall award the claimant damages adequate to compensate for the infringement, but in no event less than a reasonable royalty for the use made of the invention by the infringer ... ."18 CSIRO argues that the Federal Circuit imposed a judicial ceiling on damages where the statute creates only a floor and fashioned rules that allow for essentially de novo review of damages.19 Analogizing the case to Octane Fitness, Halo Elecs., and Stryker Corp., CSIRO argues that Congress vested the district courts with wide discretion to determine the amount of damages, and the Federal Circuit improperly stripped the courts of that power.20

CSIRO further asserts that apportionment has no place in modern damages calculations, and that, at least where "real-world licensing evidence" is in the record, the courts should not limit damages because of apportionment.21 CSIRO's biggest criticism, however, focuses on the Federal Circuit's requirement that the courts apportion value due to the fact of standardization, since standardization excludes competing technologies from the standard and, by extension, the market, creating a high risk of artificially driving up the value of the patent.22 CSIRO contends that this apportionment is untethered to the damages statute and inappropriately caps damages against the intent of Congress.


This was one of only a few existing appellate-level cases involving standards-essential patents, and the Federal Circuit decision below lays an important foundation in this developing body of law. If the Supreme Court grants CSIRO's petition, the case could establish definitive law for standards-essential patents – and, more generally, decide the fate of apportionment in the modern patent damages analysis.

The Court may be hesitant to grant this petition. CSIRO framed its question for review broadly, and a decision on the question presented could impact patent damages law well beyond the facts of this case, in which the standards-essential status of the patent-in-suit is a key component. The Court, particularly with only eight justices, may resist deciding a case with potentially cascading effects unless absolutely necessary. While the case presents interesting policy and legal questions, such as the effect of standardization on a patent and the continued viability of apportionment, necessity may be lacking.

Furthermore, the CSIRO petition appears to conflate the Federal Circuit's holding – that the district court must account for the standards-essential status of the '069 patent – with a firm ceiling on patent damages. The Federal Circuit's rule would appear to be satisfied if the district court analyzed (1) the value of the '069 patent as compared to the 802.11 standards, and (2) whether the damages award was limited to technology actually patented. CSIRO's petition appears to assume that a damages award would automatically be reduced if the district court undertook such an analysis. While a damages reduction is likely in most cases, if the '069 patent is as transformational as CSIRO states, the '069 patent may appropriately comprise a significant portion of the value of the 802.11 standards.

The petition criticizes apportionment as an improper judicial limitation on an intentionally broad statute but fails to discuss the argument that apportionment is entirely consistent with the language of § 284. Section 284 awards damages to a patentee for infringement of a patent, and the claims of a patent typically cover very specific aspects of technology. Apportionment, therefore, may serve as a check to ensure that damages are limited to the specific, incremental development that the patent contributed to the state of the art. Viewed through this lens, apportionment gives meaning to the word "infringement" in § 284 and ensures that damages do not stretch beyond the patent's contribution.

Opposing CSIRO's motion for rehearing en banc at the Federal Circuit, Cisco argued that the Federal Circuit faithfully applied Ericsson.23 Cisco noted that the district court did not have the benefit of Ericsson when it released its decision, justifying remand. Because the district court failed to expressly discuss the impact of standardization on the '069 patent's value, including during the Georgia-Pacific analysis, Cisco contended that remand is appropriate to ensure that the royalty rate accounts for the value of the technology taught by the '069 patent, apart from any value the '069 patent may have accumulated through standardization.


Important public policy concerns abound in the developing law surrounding the standards-setting process. Patentees want to maximize royalty revenue. Manufacturers want to implement standards into their products without being subject to unpredictably high royalties. And consumers want to buy products, confident in the inter-compatibility promised by standards-setting organizations, at a relatively affordable price. This case potentially impacts each of these groups. Furthermore, the question presented in CSIRO's petition asks the Court to revisit a foundational analysis in calculating patent damages. Accordingly, the potential impact of a grant of certiorari in this case is enormous.

CSIRO's decision to challenge apportionment generally, instead of simply the application of apportionment to standards (a much more recent development), may lessen the petition's chances of being granted. CSIRO likely made this strategic decision in an attempt to piggyback on Octane Fitness, Halo Elecs., and Stryker Corp. Nonetheless, the Court may resist this petition, as the consequences of a decision on the question presented will likely extend well beyond the facts of the case. Furthermore, the CSIRO petition's failure to squarely address the argument that apportionment is consistent with the text of § 284 presents a one-sided story.

An interesting wrinkle in this case involves issues with RAND royalty rates, a related and rapidly developing area of law intertwined with standards development. CSIRO initially agreed to license the '069 patent under RAND terms for an early iteration of a standard, but refused for later iterations of the same standard. Similar factual scenarios may become increasingly prevalent in the standards setting, and future cases may help clarify whether the RAND encumbrance remains on the patent for later versions of the same standard, or whether refusing to license a patent under RAND terms after causing competing technologies to be excluded from the market by an earlier RAND commitment constitutes some form of patent misuse or antitrust violation.

We will follow this petition and these areas of the law and follow up with additional posts as the issues develop.


1 Petition for Writ of Certiorari, CSIRO v. Cisco Sys., Inc., No. 15-1440, at i (U.S. May 25, 2016).

2 CSIRO v. Cisco Sys., Inc., 809 F.3d 1295, 1297 (Fed. Cir. 2015).

3 Id. at 1298.

4 Id.

5 Id. at 1299-1300.

6 Id. at 1297.

7 See id. at 1301-06.

8 Petition for Writ of Certiorari, supra note 1.

9 See, e.g., Ericsson, Inc. v. D-Link Sys., Inc., 773 F.3d 1201, 1226 (Fed. Cir. 2014).

10 Id.

11 Id. at 1226-27.

12 Id.

13 See, e.g., id. at 1232-33.

14 Id.

15 CSIRO, 809 F.3d at 1305-06.

16 See 35 U.S.C. § 284.

17 Petition for Writ of Certiorari, supra note 1, at 7.

18 35 U.S.C. § 284.

19 Petition for Writ of Certiorari, supra note 1, at 8.

20 See, e.g., id. at 8-10.

21 Id. at 9.

22 Id. at 15.

23 Cisco's Response to CSIRO's Combined Petition for Panel Rehearing and Rehearing En Banc, CSIRO v. Cisco Systems, Inc., No. 15-1066, at 3 (Fed. Cir. Feb. 5, 2016).

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.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
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).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions