The Perils of Being ‘Half-Committed’ to FRAND

Earlier this 12 months, a jury trial was held within the matter of G+ Communications, LLC v. Samsung Electronics Co., Samsung Electronics America, Inc., Case No: 2:22-CV-00078-JRG (E.D. Texas). Pursuant to the jury’s verdict, two of the three patents asserted had been discovered to be infringed by Samsung, and compensation was awarded to G+ within the quantity of $45 million for one patent and $22.5 million for the opposite. The decision additional indicated these quantities had been working royalties versus lump sum royalties. Moreover, the jury discovered G+ had not “breached its [fair, reasonable and non-discriminatory] FRAND obligation by failing to supply a license to the Asserted Patents to Samsung that was truthful, cheap, and non-discriminatory, and by failing to behave in good religion relating to negotiations with Samsung as to a FRAND license overlaying the Asserted Patents.”

Following this end result, Samsung sought a brand new trial on damages, which the District Court docket for the Japanese District of Texas ordered given the courtroom had “materials issues about jury confusion relating to the type of the cheap royalty awarded [therein] – i.e., that the jury might have awarded damages within the type of a working royalty when it supposed to award them as a lump sum.” One issue influencing the courtroom’s resolution was the truth that, if the quantities awarded had been working royalties, the efficient per-unit royalty charge for one of many patents would exceed the per-unit quantity G+ requested at trial.

G+’s Movement Previous to the New Trial on Damages

Previous to the brand new trial on damages, G+ introduced a Movement to Implement Subject and Declare Preclusion that G+’s Damages Request Does Not Violate FRAND and to Preclude Introduction of Settlement Presents. Particularly, G+’s movement sought to ban Samsung from the next:

• Arguing that G+’s damages request violates FRAND;
• Introducing the phrases of G+’s settlement gives; and
• Alleging {that a} FRAND obligation attaches to the patents until Samsung concedes the patents are important.

A ruling on G+’s movement is about forth in a MEMORANDUM OPINION AND ORDER dated April 12, 2024.

With respect to the primary side of its movement, G+ ’s wished Samsung to be precluded from arguing G+’s damages request violates FRAND due to the jury’s discovering that G+ had not breached its FRAND obligation. In denying G+’s movement, the courtroom held that “[w]hether or not G+’s damages request within the re-trial is in step with a FRAND royalty is a reside difficulty…”, including that “[t]he Court docket won’t speculate that the jury’s reply…–associated to Samsung’s reason behind motion for breach of contract–can be a silent dedication that G+’s full damages request on this litigation is FRAND.”

One might surprise how, precisely, is FRAND a reside difficulty in terms of the problem of damages for patent infringement and why should G+’s damages request be FRAND? Recall, within the matter of Optis Wi-fi Know-how, LLC et al. v. Apple Inc., Civil Motion No. 2:19-cv-00066-JRG (E.D. Texas), Choose Rodney Gilstrap defined that the “Federal Guidelines of Civil Process 8(c)(1) identifies “license,” “launch,” and “waiver” as affirmative defenses” (See Opinion and Order as to Bench Trial Together with Supporting Finds of Fact and Conclusions of Law). Assuming, for sake of argument, that Samsung’s rights beneath G+’s contract with the European Telecommunications Requirements Institute (ETSI) one way or the other embrace the best to FRAND licenses, the unexercised rights of third-party beneficiaries of contractual obligations is not any protection to infringement. A greater method to have a look at the duty owed to Samsung, nonetheless, as mirrored within the verdict type offered to the jury, is that Samsung was entitled to obtain a FRAND provide and have G+ negotiate in good religion. Given G+ didn’t breach its obligations, Samsung apparently did train its rights and, by selecting to not settle for the provide, had no protection to infringement. Taking a step again, we observe that affirmative defenses go to the problem of legal responsibility, whereas damages assume legal responsibility and think about applicable compensation for such legal responsibility (as is mirrored within the G+ v. Samsung verdict type which instructs the jury to solely reply compensation questions relating to these patents discovered infringed). As such, contemplating FRAND-based defenses, in the event that they had been to exist, on the damages section, is complicated.

Even when there had been a breach of such an obligation by G+, which there was not, shouldn’t damages for breach be assessed in accordance with contract regulation rules, as was completed in Microsoft Corp. v. Motorola, Inc., 795 F.3d 1024, 1040 (ninth Cir. 2015), as a substitute of comingling with the problem of patent damages? For instance, if an inexpensive royalty for infringement within the absence of a license was discovered to be $1/unit, however the FRAND charges was $0.75/unit, a courtroom may award the $1/unit in damages to the patent proprietor and, assuming the patent proprietor breached its contractual obligation by not making a FRAND provide or refusing to barter in good religion, and award $0.25/unit in contract damages to the infringer. Notably, the USA Court docket of Appeals for the Fifth Circuit in HTC Corp. et al. v. Telefonaktiebolaget LM et al. discovered that patent damages regulation was inapplicable to a breach-of-FRAND declare (as we wrote about here). Stands to motive the inverse must also be true (i.e. {that a} breach-of-FRAND declare is in relevant to patent damages regulation… particularly when there isn’t a breach). Coming again to G+ and Samsung, the MEMORANDUM OPINION AND ORDER notes Samsung’s rivalry that “G+ is wrongly conflating the problem of G+’s alleged contractual breach of FRAND regarding prior licensing gives and negotiations (not at difficulty within the re-trial) with the problem of whether or not G+’s damages request on this litigation is non-FRAND.” Respectfully, in our view, Samsung is the one improperly conflating patent and contract regulation points.

Choose Gilstrap additionally referenced Samsung’s argument that “as a result of a FRAND obligation attaches to the Asserted Patents, ‘Samsung is entitled the chance to distinction [G+’s] damages ask at trial with FRAND charges in comparable licenses in order that the jury can assess whether or not [G+’s] damages ask is in step with its obligation to license on FRAND phrases.’” This assertion is difficult to reconcile with the courtroom’s prior rulings that Samsung’s irrevocability arguments had been “untenable” and that “[i]t is each sensible and logical that the obligations of a celebration appearing in good religion be suspended when a counterparty to a negotiation for a FRAND license is appearing in dangerous religion” (which we wrote about here). Shouldn’t Samsung’s refusal to acquire a license, within the absence of G+ breaching its obligations to make a FRAND provide and negotiate in good religion, warrant suspension of the duty, at the very least with respect to previous infringement? Talking of which, we might be remiss to not level out that the declaration utilized by the  ETSI refers to “licenses” (i.e. permission to do one thing sooner or later), not “releases” for previous infringement within the absence of a license (as we explored intimately here). In any occasion, whether or not or not the duty attaches to the patents, is irrevocable, and/or was not suspended, doesn’t convert the ETSI contract right into a protection to patent infringement.

With respect to the second side of the movement, Choose Gilstrap rejected G+’s rivalry that “as a result of ‘[b]attain of FRAND is not in difficulty on this case…” the prior licensing gives of the events “shouldn’t be admissible on the upcoming damages trial”, and agreed with Samsung that that the gives “serve a probative objective” and will, due to this fact, be “offered in redacted type to indicate the follow within the business in FRAND licensing negotiations, together with the particular practices of the events.” For instance, such a objective may embrace exhibiting that G+ handled all its patents as being of equal worth, and that “… Samsung seeks a lump sum construction in licensing patents and depends on a market comparables method for valuation.”

Concerning the third side of the movement, Choose Gilstrap as soon as once more sided with Samsung and rejected G+’s contentions that “Samsung shouldn’t be allowed to argue that damages on this case ought to be restricted by any FRAND obligation until it concedes that the patents are important” and that “[i]f Samsung is permitted to alter course and argue the patents are important, then G+ ought to be permitted to current damages for all Samsung 5G customary merchandise, which can dramatically enhance the damages base.” However given essentiality is a situation to the duty set forth within the ETSI contract, one would possibly surprise why Samsung ought to be entitled to FRAND remedy if not accepting the situation has been met (see here for extra colour on this level).

Very similar to the courtroom’s ruling on the primary side of the movement, the rulings relating to the second and third points equally relaxation on the problematic assumption that FRAND associated contract points are one way or the other related to patent damages, even within the absence of any breach by the patent proprietor (to justify offsetting patent damages with damages for breach of contract) or any acceptance of essentiality by the infringer.

Taking part in Quick and Free with FRAND

Despite the fact that Choose Gilstrap discovered FRAND to not be in difficulty within the Optis Wi-fi Know-how, LLC et al. v. Apple Inc. ruling referred to above (given Apple failed to boost a FRAND based mostly counterclaim or affirmative protection), a brand new trial on damages was ordered on account of the courtroom in that case being “persuaded that the FRAND-compliance of the damages awarded by the jury has legitimately been known as into query.” As we famous in an article on the time, elevating most of the similar questions raised herein, one issue influencing courtroom’s resolution was, in Choose Gilstrap’s phrases, “either side play[ing] quick and free with the FRAND difficulty earlier than the jury for their very own strategic causes.”

Harking back to that call, Choose Gilstrap highlighted, with respect to 3rd side of G+’s movement, that though G+ sought to argue FRAND was not at difficulty, “G+ absolutely embraced the essentiality of the Asserted Patents at trial, together with the FRAND encumbrance related to these patents.” Additional, Choose Gilstrap famous that “the one damages fashions mentioned at trial associated to FRAND-based damages.” G+ searching for to extend the damages base by forcing Samsung to concede essentiality, however it “dropped sure accused merchandise on the eve of trial of its personal volition”, appears to have notably irked Choose Gilstrap who said “[t]o enable G+ to reverse course and, for the very first time, now argue that it’s entitled to hunt non-FRAND damages could be wholly inappropriate and improper.”

Whereas now we have typically written about implementers wanting their FRAND cake and to eat it too, this resolution highlights the perils of patent house owners being equally half-committed to FRAND.

Picture rights acquired by AdobeStock