Antitrust Issues for Standard Essential Patents

AuthorBradford P. Lyerla
Pages223-241
223
chapter 6
Antitrust Issues for Standard
Essential Patents
I. Introduction
Recent litigation has brought to light the complex legal issues confronted
when patented technology is standardized. Well-known standard setting
organizations (SSOs) such as the European Telecommunications Stan-
dards Institute (ETSI), International Telecommunications Union (ITU)
and the Institute of Electrical and Electronics Engineers (IEEE) have
been proposing and setting rules to help alleviate conflicts that arise with
respect to the open access dichotomy that exists between a patent monop-
oly and open standards that incorporate patented technology.1 A patent
normally grants a monopoly for twenty years to its owner to exclude oth-
ers from practicing the claimed technology. However, incorporating such
patented technology into a standard is meant to provide open, but not free,
access to the technology for all users and implementers. The courts have
been construing SSO rules designed to bridge this dichotomy with more
frequency. This chapter will address important legal precedent at the
intersection of standards, patent law, and antitrust law.
II. Private Actions Related to Standard
EssentialPatents
§6.1 FRAND Commitments
In one of a series of lawsuits between Microsoft and Motorola, a district
court held that a licensee does not have to make a first contact for a fair,
1. J. Contreras & D. Newman, Developing a Framework for Arbitrating Standard
Essential Patent (SEP) Disputes, 2014
J. Disp. Resol
. 2–3.
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reasonable, and non-discriminatory (FRAND) commitment to apply.2 It
should be noted that FRAND commitments may also be referred to as
reasonable and non-discriminatory (RAND) commitments or as F/RAND
commitments, and the terms may be interchangeably used. The district
court held that an initial offer by a patent holder need not be FRAND,
but must comport with principles of good faith and fair dealing in order
to comply with a FRAND commitment.3 On appeal, the Ninth Circuit held
that the district court’s conclusion that a FRAND agreement created a
contract enforceable by Microsoft was not “legally erroneous.”4 On remand,
Judge Robart extensively reviewed Motorola’s patent portfolios regarding
Wi-Fi and video coding technology and their importance to their respective
standards.5 Relying upon the fifteen-factor Georgia-Pacific test,6 Judge
Robart computed the RAND royalty rates for both patent portfolios.7 Judge
Robart’s ruling was subsequently incorporated into a jury trial regarding
Microsoft’s breach of contract claim against Motorola for allegedly failing
to comply with FRAND.8 The jury entered a verdict for Microsoft and, pur-
suant to Federal Rule of Civil Procedure 54(b), the case is now on appeal
to the Federal Circuit.
In In re Innovatio IP Ventures,9 the parties agreed to have the court
determine the RAND royalty amount in the event that infringement was
established, so that the parties would have a clearer framework for poten-
tial settlement. The court relied heavily upon Judge Robart’s Microsoft
opinion, in applying the Georgia-Pacific factors to the Innovatio stan-
dard-essential patents (SEPs) at issue. The court also adopted the three-
step approach utilized by Judge Robart:
1. Consider the importance of the patent portfolio to the standard,
considering both the proportion of all patents essential to the
standard that are in the portfolio, and also the technical contribution
of the patent portfolio as a whole to the standard.
2. Consider the importance of the patent portfolio as a whole to the
alleged infringer’s accused products.
3. Examine other licenses for comparable patents to determine a
RAND rate. Based on this framework, the court set the RAND
2. Microsoft Corp. v. Motorola, Inc., 864 F. Supp. 2d 1023 (W.D. Wash. 2012).
3. Id.
4. Microsoft Corp. v. Motorola, Inc., 696 F.3d 872 (9th Cir. 2012).
5. Microsoft Corp. v. Motorola, Inc., 2013 U.S. Dist. LEXIS 60233 (W.D. Wash. Apr. 25,
2013).
6. Ga.-Pac. Corp. v. U.S. Plywood Corp., 318 F. Supp. 1116, 1120 (S.D.N.Y. 1970).
7. Microsoft, 2013 U.S. Dist. LEXIS 60233.
8. Id.
9. In re Innovatio IP Ventures, LLC Patent Litig., No. 11 C 9308, 2013 WL 5593609 (N.D.
Ill. Oct. 3, 2013).
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