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Federal Circuit Tackles RAND Royalty Rates

By Matthew Siegal and Adam Sapper
December 31, 2014

The Court of Appeals for the Federal Circuit, on Dec. 4, 2014 in a case of first impression, ruled that when the patent at issue is a standard essential patent (SEP) and its owner is subject to an obligation to license that patent on reasonable and non-discriminatory (RAND) terms, the jury instructions must discuss the specific obligations of that patentee and not RAND commitments in general. Ericsson, Inc. v. D-Link Systems, Inc., 2014 WL 6804864, at 26 (Fed. Cir. 2014). Furthermore, the patentee must apportion out the value of the patent attributable to its RAND status from the value of the patented feature itself. Id. As a result, the Federal Circuit affirmed the district court's finding that D-Link Systems, Netgear, Dell and several other companies infringed two of Telefonaktiebolaget LM Ericsson's patents, but vacated the jury's monetary award and remanded because of inadequate instructions on the issue of damages. Id.

Background

Ericsson holds several patents related to Wi-Fi technology. Before the standards development organization IEEE (Institute of Electrical and Electronics Engineers, Inc.) published its 802.11 standards for Wi-Fi, IEEE received assurances from Ericsson to mitigate potential concerns of royalty stacking and patent hold-up. Ericsson, at 2. According to the Federal Circuit, Ericsson made a binding promise to grant licenses “under reasonable rates to an unrestricted number of applicants on a worldwide basis with reasonable terms and conditions that are demonstrably free of unfair discrimination,” i.e., RAND terms. Id. at 2.

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