Cases Involving Standard
Essential Patents: U.S. & Asia
Toshiko Takenaka, Ph.D.
Director, CASRIP
University of Washington School of Law
POLICIES
Necessity to Balance Competing Policies
• Patent Policies
• Promotion of progress of useful arts
• Territoriality principle
• Competition Policies
• Protection and promotion of fair competition
• Territoriality Principle
• Contract Policies
• Freedom of contract
• Int’l Private Law (Conflict of law & Jurisdiction)
CHALLENGES
Multinational business activities v. Territoriality Principle
of Patents
• U.S.
• Patent: Property Rights
• Contract: Freedom of contract prevails without an anticompetitive effect
• Europe
• Patent: Monopoly
• Contract: Competition policy and other public policies limit
freedom of contract
• Japan
• Patent: Explicit exception from antitrust enforcement
• Contract: Competition policy and other public policies limit
freedom of contract
MICROSOFT v. MOTOROLA
U.S. District Court, West. Washington
• Motorola holds standard essential patents (SEPs) for
systems and methods for encoding and decoding
a bit-stream of digital video data. This technology
relates to standards set by Int’l SSOs ( H264;
IEEE802.11)
• The SSOs require disclosures of SEPs and agreeing to
license those patents to all comers under RAND
terms. Motorola submitted declarations to agree to
license its patents under the RAND terms.
MICROSOFT v. MOTOROLA
U.S. District Court, West. Washington
• 2010 October
• Motorola offered a license at a royalty rate of 2.25% per
end product
• 2010 November
• Microsoft sued Motorola for breach of contract in WA
• Motorola sued Microsoft in Wisconsin, suit transferred to WA
• 2011 July
• Motorola sued Microsoft for patent infringement in
Manheim, Germany
• 2012 February
• West. WA Dist. Ct. Summary Judgment
• Microsoft has a right as a third party beneficiary to a RAND
license
MICROSOFT v. MOTOROLA
U.S. District Court, West. Washington
• 2012 May
• Manheim Dist. Ct. Judgment
• Microsoft has no third beneficiary right
• Microsoft infringes Motorola’s patents
• Grant of injunction (Orange Book Procedure)
• 2012 May
• West. WA Dist. Ct. Preliminary Injunction
• Foreign anti-suit injunction factors
• Issues-Parties are the same: Private disputes between U.S. parties
• Motorola’s filing of the German action frustrates WA Ct’s ability to
adjudicate issues adequately
• Preliminary injunction factors
• Irreparable harm from German injunction on Microsoft businesses
MICROSOFT v. MOTOROLA
U.S. District Court, West. Washington
• 2012 September
• 9th Circuit affirmed West. WA Dist. Ct.’s grant of injunction
• A private dispute under Washington state contract law between
two U.S. firms
• 2012 October
• West. WA Dist. Ct.
• Ct will decide the RAND range to facilitate jury’s decision on
Microsoft’s breach of contract claim
• RAND rates under German law through Orange Book Procedure is
different from RAND rates under U.S. Law
• 2012 November
• West. WA Dist. Ct. denies Motorola’s request of injunction
• eBay factors
• No irreparable harm
• Adequate common law remedies
MICROSOFT v. MOTOROLA
U.S. District Court, West. Washington
• 2013 March
• West. WA Dist. Ct. Summary judgment
• Some of claims asserted by Motorola are indefinite and invalid
• 2013 April
• West. WA Dist. Ct. Order
• Range of RAND Royalty
• H.246 Patents: 0.555 – 16.389 cents
• IEEE 802.1 Patents: 3.471 cents for X box; 0.8 cents for other products
• Total royalty per year: $1.8M
• Comp: Motorola request: $4B (20 times more); Microsoft request:
$1.2M (1.5 times more)
MICROSOFT v. MOTOROLA
U.S. District Court, West. Washington
Framework for Assessing RAND terms
• Basic Principles
• Consistent with SSOs’ Purpose: Promoting widespread
adoption of their standards
• Mitigate patent hold-up and royalty stacking risks
• Incentive to develop valuable standards
• Modification of Georgia Pacific Factors
• Hypothetical Negotiation: Difference from calculation of
damages in the form of reasonable royalty
• Licensor is under the obligation to give a license under RAND
terms
• Hypothetical negotiation will not take place in a vacuum
GEORGIA PACIFIC FACTORS
1. Past royalty for asserted patents
• Royalties under RAND obligation: Patent pools and licenses outside
patent pools for asserted patents
2. Past royalty for patents comparable to asserted patents
3. Nature and scope of the license
4.
5.
Licensor’s licensing policies
Relationship between licensor & licensee
6. Effect of patented products on licensee’s non-patented
products
• Distinguish the value of patent technologies from the value associated
with incorporation of the patented technologies into the standards
(factors 8 and 10)
• Contribution of asserted patents to the technical capability of the
standard (factor 8)
7. Duration of asserted patents
8. Profitability of patented products
GEORGIA PACIFIC FACTORS
9. Utility & advantages of asserted patents
• Comparison with alternatives that could have been written into the
standard during the period before the standard was adopted and
implemented
10. Nature of patented invention
11. Extent of infringing use; probative evidence of such use
12. Portion of profits or selling price customarily allowed for the
use of the invention
• Customary practices of businesses licensing RAND committed patents
13. Apportionment of profits between patented and
unpatented portions of product
14. Expert testimony
15. Amount resulting from a hypothetical negotiation between
willing licensor and licensee
• Basic principles incorporated
MICROSOFT v. MOTOROLA
U.S. District Court, West. Washington
• RAND Royalties under Hypothetical Negotiation
• Contribution to the standard: Low
• Narrow claim scopes: means-plus-function claims with
limited disclosures
• Minimal technical advances
• Availability of alternative technologies
• Value of the invention: Low
• Patents related almost entirely to interlaced video
• Alternative: Progressive video
• Interlaced video is becoming less prevalent in the market but
still important to Microsoft
MICROSOFT v. MOTOROLA
U.S. District Court, West. Washington
• H264
• Hypothetical negotiation: Analogous to a negotiation through
a patent pool in which all patent SEP holders were added –
Desired RAND licensing situation
• 0.185 cents: Royalties Microsoft would have paid under the above
hypo
• Low end: 0.185 + 2 x 0.185 (Value of Motorola SEPs) = 0.555 cents
• High end: 1.50 (Highest royalty considered during formation of the
patent pool) x 3.632% (pro rata share of Motorola SEP portfolio =
$0.05463
• IEEE 802.11
• Hypothetical negotiation: Negotiations to form patent pools
• Low end: Lowest royalty considered among three patent pools = 0.8
cents
• High end: Royalty range Microsoft offered = 6.5 cents
APPLE v. SAMSUNG
CAFC- DIST. CT. NORTH. CA
Availability of Preliminary Injunction in non-SEP cases
• Winter v. Natural Res. Factors(eBay doctrine)
1. Irreparable Harm
a) Irreparable harm without an injunction
b) Sufficiently strong causal nexus between the harm and the
alleged infringement
 Adequate common law remedies – license practice (willingness to
license)
2. Likelihood of Success
3. Balance of Hardships
4. Public interests
 Consumers’ interests in getting access to the patented product
when the patent feature is a minor portion of the entire product
JAPAN: APPLE v. SAMSUNG
TOKYO DIST. CT.
• Samsung holds a Japanese patent for systems and
methods for transmitting and receiving packet
data. Samsung is a member of ETSI, which formed
an SSO (3GPP) and disclosed the application of the
patent as being related to a standard. Samsung
made a FRAND declaration according to ETSI IPR
policy.
• ETSI IPR policy requires disclosures of SEPs, agreeing
to license those patents to all comers under FRAND
terms, and certain rights to third parties.
• Samsung’s patent was adopted
JAPAN: APPLE v. SAMSUNG
TOKYO DIST. CT.
• 2011 April
• Samsung sued Apple for patent infringement and requested a
preliminary injunction (a separate case)
• Apple-Samsung executed an NDA for license negotiation
• 2011 July
• Samsung offered a license with X% royalty rate
• 2011 August
• Apple requested information supporting that X% royalty rate is
in accordance with the FRAND commitment and asserted that
X% is unreasonably high
• 2011September
• Apple sued Samsung for judgment declaring Samsung has no
claim of damages against Apple
JAPAN: APPLE v. SAMSUNG
TOKYO DIST. CT.
• 2012 March
• Apple offered to accept a license with Y% rate
• Samsung asserted that Y% is unreasonably low
• 2012 September
• Apple offered a cross-license and proposed a basic
principle for calculating royalty rates for mobile and smart
phone related SEPs
JAPAN: APPLE v. SAMSUNG
TOKYO DIST. CT.
Issues
• Applicable Law: Japanese Law
• Patent infringement-tort: The law of the country where a harm
resulted from a tortious act
• Infringement and Validity
• Court found infringement
• Apple raised invalidity issues but the court did not address the
issues
• No Damage Award Available: Unenforceable
• Court found abuse of rights under Civil Code
• Denied injunction in a separate case
• Apple raised anti-monopoly issues as a ground for supporting
its abuse of rights defense but the court did not address the
issues
JAPAN: APPLE v. SAMSUNG
TOKYO DIST. CT.
• No Injunction - Abuse of Right under Civil Code
• Violation of duty to negotiate a FRAND license in good faith
after an offer of license from Apple (2012 March)
• Apple’s offer is valid even if the offer made it clear that Apple
retains its right to challenge the validity of Samsung SEPs
• Samsung’s failure to provide a specific counter proposal and
information necessary to negotiate a FRAND royalty rate gives
rise to a violation of the duty
• Delay in disclosing the patent
• Maintaining a case requesting preliminary injunction
• Other circumstances in negotiation
JAPAN: APPLE v. SAMSUNG
TOKYO DIST. CT.
Japanese Civil Code Article 1
(1) Private rights must conform to the public welfare.
(2) The exercise of rights and performance of duties must be
done in good faith.
(3) No abuse of rights is permitted.
Japanese Anti-Monopoly Law Article 21
The provisions of this Law shall not apply to such acts
recognizable as the exercise of rights under the Copyright Law,
the Patent Law, the Utility Model Law, the Design Law or the
Trademark Law.
KOREA: SAMSUNG v. APPLE
SEOUL DIST. CT.
Issues
• Applicable Law
• License/Estoppel: French Law
• Other issues: Korean Law
• Infringement and Validity
• Some of asserted claims lacks novelty and thus their patents
are not enforceable –abuse of patent rights
• Exhaustion
• No exhaustion
• Injunction and Damage Award Available
• No violation of FRAND declaration
• No violation of Fair Trade Act
• Apple (Infringer)’s operating profits are awarded as damages
KOREA: SAMSUNG v. APPLE
SEOUL DIST. CT.
• No Violation of FRAND Declaration by Seeking
Injunction
• No license or estoppel by unilateral act of FRAND
declaration without a specific royalty rate
• No abuse of right under Civil Code
• Samsung’s offered rate was not excessive
• Both Samsung and Apple violated their duties to negotiate
FRAND license in good faith.
• Samsung’s request of an injunction does not aim only to inflict
harm and damages to Apple
• No interference of fair competition
KOREA: SAMSUNG v. APPLE
SEOUL DIST. CT.
Abuse of Rights under Civil Code


Subjective element: The purpose of the exercise of right is
only to inflict pain or harm to the other party; and
Objective elements: a) There is no benefit to the person
exercising the right; and b)The exercise of right can be
seen objectively as violating the social order
Abuse of Patent Rights

Enforcement of patent rights interferes with fair
competition and transaction
KOREA: SAMSUNG v. APPLE
SEOUL DIST. CT.
• No Violation of Fair Trade Act
• Seeking injunction is not an abuse of market dominant
position or refusal
• Samsung has a dominant position in the mobile devices and
tablet computers supporting 3GPP communications
• Samsung’s asserted patents constitute essential facilities
• No unfair refusal to deal: Samsung did not refuse to license its
patents permanently – Its act does not give rise to a refusal of
access to essential facilities (No anti-competitive effect)
• No unfair price discrimination or practice
• No abuse of market dominant position to hampers competitors
business activities: No delay in disclosing patents
• No interference with competitors’ relationship with customers
CHINA: JIQIANG, LIUHUI v. XINGNUO
LIAONING HIGH COURT
• Jiqiang holds SEP related to a standard issued by China’s
Ministry of Construction and sued a competitor who raised an
SEP defense.
• The Liaoning High Ct. referred the question of SEP defense to
the Supreme People’s Court (SPCC).
• SPCC Response
• In view of the lack of regulations regarding disclosure and
enforcement of patents covering standards, if patents are
incorporated into national, industrial, or provincial standards by the
patentees participating in the standard-setting process or with the
patentees’ consent, it shall be deemed that the patentees grant
others licenses to exploit the patents while implementing the standards
and that others’ exploitation of the patents does not constitute patent
infringement. The patentees may demand implementers to pay
certain royalties but at a price significantly lower than the normal
royalties; the patentees may also give up royalties.
CONCLUSION
• Availability of Injunction
Case-by-case analysis
• U.S.: eBay doctrine
• Japan & Korea: Abuse of right under Civil Code
• Korea: Fair Trade Act violation – Rule of Reason approach
No injunction
• China: Implied license
• Availability of Damages
• U.S.: Reference to comparable licenses (patent pool license
rates)
• Korea: Lost Profits
• China: Lower than comparable license rates
• Are damages more than FRAND rates available?
FINAL REMARKS
Roles of courts in FRAND license disputes
• Duty to Negotiate in Good Faith
• Korea and Japan: Passive
• Depending on a filing of a violation
• Implied License or Obligation to Give License
• U.S. and China: Active (early involvement)
Thank you very much!
If you have any questions,
Email me at toshiko@uw.edu