Digest of Ericsson, Inc. v. D-Link Systems, Inc., No. 2013-1625, -1631, -1632, -1633 (Fed. Cir. Dec. 4, 2014) (precedential). On appeal from E.D. Tex. Before O’Malley, Taranto and Hughes.

Procedural Posture: Ericsson sued multiple defendants for infringement of its five patents essential to Wi-Fi (IEEE 802.11(n)) standard, which generally relate to Wi-Fi technology employed by electronic devices to wirelessly access the Internet. A jury found three of the asserted patents infringed and not invalid, and awarded Ericsson $10 million in past damages. A separate bench trial was held regarding several “RAND” (“reasonable and non-discriminatory” terms) issues and, based on the jury’s award, the court found that 15 cents per product was an appropriate ongoing RAND rate for the three infringed patents. CAFC affirmed infringement finding as to two asserted patents and reversed as to the third patent, vacated damages award, and remanded for re-determination of an appropriate amount of damages.

  • Infringement: The jury had substantial evidence to find infringement of claims of one of the asserted patents (the ’568 patent). When the asserted claims recite capability, a “reasonably capable” accused device can be found to infringe “particularly where, as here, there is evidence that the accused device is actually used in an infringing manner and can be so used without significant alterations.”
  • Claim Construction: The district court correctly did not read the additional limitations proposed by defendants into the disputed term of the ’215 patent. CAFC adopted the district court’s construction of “responsive to the receiving step, constructing a message field for a second data unit, said message field including a type identifier field” as “responsive to the receiving step, generating a message field including a field that identifies the message type of the feedback response message from a number of different message types.”
  • Infringement: The district court was correct in finding that Ericsson presented substantial evidence of induced infringement, consisting of actual use and the intent to infringe, to uphold a jury finding that defendants infringed the asserted method claims of the ’215 patent.
  • Infringement: No reasonable jury could have found that the accused products meet all limitations of claim 1 of the ’625 patent. Ericsson did not present substantial evidence that the transmitter in the accused products “commands the receiver to receive the out-of-order packets,” which is required to meet the claim limitation. CAFC reversed the district court’s refusal to grant JMOL of no infringement as to this patent.
  • Invalidity: Anticipation. CAFC upheld the jury’s finding of no invalidity of the ’625 patent. Both parties presented expert testimony regarding the alleged anticipation of the patent by a prior art reference, and the jury was entitled to credit Ericsson’s evidence over that of the defendants.
  • Damages: Licensing Evidence. The district court properly admitted evidence of the licenses tied to the full value of the licensed products. The standard for the entire market value rule “is that the ultimate reasonable royalty award must be based on the incremental value that the patented invention adds to the end product.” A corollary evidentiary principle relevant to the royalty base “is that, where a multi-component product is at issue and the patented feature is not the item which imbues the combination of the other features with value, care must be taken to avoid misleading the jury by placing undue emphasis on the value of the entire product.” The expert testimony at issue did not violate the Garretson apportionment rule or the stated evidentiary principle.
  • Jury Instructions: Licenses and Apportionment. “When licenses based on the value of a multi-component product are admitted, or even referenced in expert testimony, the court should give a cautionary instruction regarding the limited purposes for which such testimony is proffered if the accused infringer requests the instruction.” Also, the jury instructions should “fully explain the need to apportion the ultimate royalty award to the incremental value of the patented feature from the overall product.”
  • Jury Instructions: Damages. “We hold that, in all cases, a district court must instruct the jury only on [Georgia-Pacific] factors that are relevant to the specific case at issue,” Many of the Georgia-Pacific factors are irrelevant to RAND-encumbered patents. Jury Instructions: RAND Obligation. In a case of first impression, CAFC discussed how a jury should properly be instructed on damages calculations in cases involving RAND-encumbered “standard essential patents” (“SEPs”). CAFC stated that “in a case involving RAND-encumbered patents, many of the Georgia-Pacific factors simply are not relevant; many are even contrary to RAND principles.” The District Court erred in instructing the jury on such irrelevant or misleading Georgia-Pacific factors, including factors 4, 5, 8, 9, and 10. An instruction about the patentee’s “actual RAND promises” is also required in cases involving RAND obligations.
  • Jury Instructions: RAND Obligation. CAFC believed “it unwise” and expressly declined to create “a modified version of the Georgia-Pacific factors that should be used for all RAND-encumbered patents,” rejecting defendants’ argument “that the trial court was required to give instructions that mirrored the analysis in Innovatio or Microsoft.” Damages: Apportionment for SEPs. CAFC held that “a royalty award for a SEP must be apportioned to the value of the patented invention” as opposed to the value of the entire standard, and to the value of the patented technology that should be distinguished from “the value of its standardization.” CAFC held “that the royalty for SEPs should reflect the approximate value of that technological contribution, not the value of its widespread adoption due to standardization.”
  • Jury Instructions: RAND-Encumbered Patents. No special instructions on issues unique to RAND-encumbered SEPs (patent hold-up, royalty stacking) are needed unless an accused infringer presents evidence on these issues.
  • Jury Instructions: Failure to instruct the jury (i) on patentee’s actual RAND commitment; (ii) “that any royalty for the patented technology must be apportioned from the value of the standard as a whole”; (iii) that the RAND royalty rate must be based on the value of the invention itself, not value added by its standardization; and (iv) instructing the jury to consider irrelevant Georgia-Pacific factors collectively constituted prejudicial error. CAFC vacated jury damages award and district court’s ongoing royalty award, and remanded.
  • Agency: One of defendants failed to raise a genuine issue of material fact as to whether the plaintiff-patentee acted as an agent of its subsidiary, with whom that defendant has a licensing agreement; the district court properly granted summary judgment to the plaintiff on this issue.

Taranto, dissenting in part:

  • Claim Construction: The district court incorrectly construed the ’215 patent’s claim language pertaining to the invention’s message field. The accused products do not infringe under the correct construction, so judgment of infringement should have been reversed.