In ERICSSON, INC. v. D-LINK SYSTEMS, INC., Appeal Nos. 2013-1625, -1631, -1632, and -1633, the Federal Circuit affirmed-in-part and reversed-in-part the district court’s judgment of infringement and vacated and remanded the damages award.
Ericsson developed Wi-Fi technology claimed in three patents at issue. The IEEE adopted the claimed technology as 802.11(n) standards. The standards require all compliant devices to use the patented technology, and therefore Ericsson had to pledge it would grant licenses to an unrestricted number of applicants on “reasonable and non-discriminatory” (RAND) terms. D-Link manufactured 802.11(n)-compliant end products incorporating the patented technology. The district court refused to disturb the jury’s findings of infringement of all the asserted patents or its damages award. The jury awarded damages of $10 million, or a royalty rate of 15 cents per infringing device, based on the district court’s instruction to consider the 15 factors for determining a licensing royalty established in Georgia-Pacific Corp. v. U.S. Plywood Corp., 318 F. Supp. 1116 (S.D.N.Y. 1970).
On the issue of infringement, the Federal Circuit affirmed-in-part and reversed-in-part, holding D-Link infringed two of the asserted patents. With respect to the damages award, the Federal Circuit vacated and remanded. Because the patented technology was adopted as a standard, Ericsson was obligated to offer licenses under RAND terms. Under these terms, Ericsson specifically promised it would “grant a license 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.”
The Federal Circuit determined many of the Georgia-Pacific factors were irrelevant to this case and even contrary to Ericsson’s RAND obligations. For example, the fourth factor considers the licensor’s policy to maintain his patent monopoly by not licensing to others. But because of Ericsson’s RAND commitment, it cannot maintain a monopoly. Similarly, the fifth factor considers the commercial relationship between the licensor and licensee. Under the RAND terms, this factor is irrelevant because Ericsson is obligated to offer licenses at a non-discriminatory rate. Other factors would at least need to be adjusted for RAND-encumbered patents. For example, the eighth factor accounts for an invention’s “current popularity,” which is likely to be affected by the industry standard. The Federal Circuit concluded the district court should instead instruct the jury on the actual RAND commitments at issue, and not on irrelevant or misleading factors (such as the fourth, fifth, eighth, ninth, and tenth Georgia-Pacific factors). The Federal Circuit emphasized appropriate Georgia-Pacific factors can be applied, but only when such factors are relevant to the case