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Microsoft's Amicus Brief in Support of Apple in Appeal of Posner Ruling - A Change in Tune on Injunctions ~pj
Tuesday, June 11 2013 @ 11:54 PM EDT

Microsoft has now filed an amicus brief in support of Apple in the appeal of Judge Richard Posner's ruling in which the judge tossed out both Apple and Motorola's claims with prejudice, saying neither had proven damages and saying injunctive relief when there was no demonstrable harm would be against the public interest. Interestingly, Microsoft here argues in its brief that the judge didn't rule out injunctive relief for FRAND patents. That's news to me, that Microsoft holds that view. Here's Motorola's appeal brief that Microsoft references repeatedly. In it, Motorola argued that Judge Posner implied a "no-injunctions for FRAND patents" rule, and that it ought not to be followed:
As to the denial of any injunctive relief to Motorola, the district court set forth a seemingly categorical rule against injunctions for infringement of essential patents whose holders commit to SDOs to offer licenses on fair, reasonable and non-discriminatory (“FRAND” or “RAND”) terms. Under this rule, the district court declined to examine Apple’s refusal to accept a license over years of infringing use. That ruling requires this Court’s reversal, because the district court’s automatic rule that injunctions are never available for SEPs is contrary to the Patent Act, which provides injunctions as a statutory remedy; to the equitable principles of eBay; and to Motorola’s FRAND commitments to the SDOs at issue here, which did not waive its rights to injunctive relief. Subject to the terms of the FRAND commitments at issue, the same injunction rules should apply to SEPs as to all other patents, and while the traditional factors reaffirmed in eBay set a high bar, Motorola should be given the chance to surmount it.
No they shouldn't, Microsoft argues. Judge Posner already applied the eBay [PDF] elements. He didn't, Microsoft now claims, say there could never be an injunction for a RAND patent, just that Motorola didn't deserve one in this particular case, so the court shouldn't dig too deeply into the standard-essential patents issues that Judge Posner didn't dig deeply into himself.

The Essential Patent Blog has the filing [PDF]. The article tells us that Microsoft claims it just cares about ensuring that standards are implemented for the benefit of the public:

Last week, the Federal Circuit granted a motion by Microsoft for permission to file an amicus brief in the Apple-Motorola appeal (No. 12-1548, Judge Posner edition). Microsoft then filed its amicus brief, becoming the latest in a long time of companies (see, e.g., here, here, here, and here) to weigh in on the case. Today, the public version of Microsoft’s brief became available. In it, Microsoft supports Apple and Judge Posner, but cautions the Federal Circuit against making an overly broad ruling and deciding issues related to standard-essential patents and RAND licensing obligations that are not present before the court.

Microsoft pulls no punches — it argues at the outset that Motorola’s positions “are wrong as a legal matter and terrible as a policy matter.” That should come as no surprise, given Microsoft’s current litigation disputes with Motorola (as well as ongoing competition with its parent company, Google). But Microsoft claims that its interest in this case goes far beyond its adversarial relationship with Motorola, arguing that as an active participant in many SSOs and implementer of many standards, Microsoft wants to ensure that standards are broadly implemented for the benefit of the public.

Perhaps recognizing that the Federal Circuit could rule in a way that might conflict with various district court rulings on similar standard-essential patent issues (i.e., Judge Robart’s RAND-setting decision), Microsoft seems to want the court to tread lightly here. It asserts first that because Judge Posner generally based his decisions on damages and injunction relief without doing deep dives into issues unique to standard-essential patents, the Federal Circuit could resolve this appeal without making sweeping pronouncements regarding RAND or SEP issues.

Groklaw watched Microsoft closely in the standards battle of OOXML v. ODF, literally day by day with particularity from 2005 to 2013, and I don't think any of us who watched that play out would conclude that Microsoft was seeking the public benefit. So excuse my curled lip.

Rizzolo is very polite, but I'll translate the Microsoft legalese into my own plainer English: Microsoft doesn't want the appeals court to dig too deeply into standards because it loves the no-injunctions-allowed ruling it got in its own backyard from a Seattle judge recently. It would like it to be the last word. It totally doesn't want a higher court to come out with a conflicting ruling, because the higher court ruling would trump a district court. So that's why it is asking the court not to rule on any of that.

Jump To Comments

Here's the oily language that Microsoft uses on that theme:
As set out below, certain of the issues that Motorola asks this Court to address—including the proper method for setting a RAND royalty for standard-essential patents, and the circumstances, if any, in which injunctive relief may be available for infringement of such patents—although presented in other cases involving Motorola patents, including cases involving Microsoft, are not in fact presented in this appeal. Beyond that, the positions Motorola asks this Court to adopt are contrary to law and inimical to sound public policy. Microsoft, therefore, has a direct interest in ensuring that this Court not accept Motorola’s invitation both: (i) to address matters not properly before the Court; and (ii) to do so in a misguided manner that is potentially harmful to the public interest....

The law governing the assertion and enforcement of these rights is equally well established. When an infringement claim involves a patent declared essential to a standard and subject to a RAND commitment, however, additional considerations come into play. Contract and antitrust law substantially circumscribe the rights and remedies a patent owner otherwise might have, and the principles generally applied in patent litigation cannot be reflexively applied to standard-essential patents.

Microsoft describes standard essential patents and the system that has built up around them, but it does so with Microsoft-rose-colored glasses, so what it is describing is how it wants the process to be, not how it has traditionally been. If you read the excerpt from this Law 360 article [PDF, automatically downloads), "FRAND And A Patent Owner's Right To Injunctive Relief," linked from this Groklaw article, you'll see donating a patent to a standards body has never before meant you were precluded from injunctive relief. The slide on page 3:
FRAND commitment does NOT:

Constitute a license, only obligation to undertake bilateral negotiations in good faith

Impose specific license terms

Preclude injunctive relief for patentee

And Microsoft is trying to change all of that. In Seattle, it was successful. Here, though, Microsoft mutes its usual anti-injunction arguments. Here Microsoft argues that it is in the public interest to forbid injunctive relief for Motorola's FRAND patents, these particular ones, while it cleverly avoids saying that a RAND patent holder can *never* get an injunction. That's an interesting question, Microsoft says, but not germane here.

But it made that EXACT argument in the Microsoft v. Motorola case, the Seattle one, in its ultimately successful motion for summary judgment [PDF], titled "Motion for Partial Summary Judgment Dismissing Motorola's Claim for Injunctive Relief" -- in it Microsoft said a RAND patent owner can never, as a matter of law, seek injunctive relief, even if an infringer is refusing to pay:

B. As a Matter of Law, Motorola Cannot Satisfy the First Two Prerequisites for
Injunctive Relief -- Irreparable Harm and Inadequacy of Monetary Relief

The Supreme Court’s decision in eBay establishes that common law principles of equity retain their full vitality in patent cases, including the equitable rule that a party seeking injunctive relief has the burden of establishing irreparable harm that cannot be adequately remedied by monetary relief.20 A permanent injunction is not available to Motorola because, under the undisputed facts, Motorola cannot satisfy the first two requirements of the Supreme Court’s four-part test for such relief articulated in eBay. Under that test, the party seeking injunctive relief must demonstrate:
(1) that it has suffered an irreparable injury;

(2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury;

(3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and

(4) that the public interest would not be disserved by a permanent injunction.21

The first two eBay requirements are that the “plaintiff must demonstrate ... that it has suffered an irreparable injury” and that monetary damages "are inadequate to compensate" for any injury (emphasis added). I.e., irreparable injury not compensable in money is not merely a potential outcome that, with other “factors,” should be balanced; it is a prerequisite that must be met before the court even reaches the “balancing” of hardships. In eBay the Court also held that a patent holder is not entitled to a presumption of irreparable injury merely upon a showing that the patents are valid and have been infringed.22 Rather, irreparable injury must be independently established as the first element of the four-part test for injunctive relief.23 The use of the conjunctive "and" between the third and fourth elements indicates that each of the four elements must be met. This reading was recently confirmed by the Ninth Circuit in Perfect 10, where the court stated that it “review[s] the district court’s determination that the plaintiff satisfied each of these four factors for abuse of discretion.”24 In Perfect 10, the court affirmed the district court’s denial of injunctive relief because the plaintiff had not shown irreparable harm.25

While a Court’s decision whether to grant an injunction is reviewed for abuse of discretion, the Court does not have discretion to grant an injunction here because irreparable harm cannot be shown. Under the applicable “principles of equity” reflected in the eBay Court’s four-part test, the absence of irreparable harm, or a concession that any harm is compensable in money, is fatal to any request for injunctive relief. The Ninth Circuit has held that monetary injury, including lost revenue, does not constitute irreparable injury because it can adequately be compensated by a damage award.26 The “severe remedy of an injunction” was not justified for the defendant’s copyright infringement where the plaintiff could recover actual damages, including the profits of the infringer.27 The court has adopted the Supreme Court’s statement of the rule in Sampson v. Murray:

[T]he temporary loss of income, ultimately to be recovered, does not usually constitute irreparable injury . . . . Mere injuries, however substantial, in terms of money, time and energy necessarily expended . . . are not enough. The possibility that adequate compensatory or other corrective relief will be available at a later date, in the ordinary course of litigation, weighs heavily against a claim of irreparable harm.28
Here there is not merely a “possibility,” but a certainty, that monetary compensation is adequate. Motorola has contracted to license its technology in return for RAND royalties to all comers and it has demanded royalties from Microsoft for a license to its claimed essential H.264 patents. Motorola cannot be heard to claim that unique conditions applicable to some alleged infringers, including Microsoft, create “irreparable harm.” It sought Microsoft out, delivering a demand that it receive monetary compensation for all implementations of its H.264 technology, and it had earlier agreed to accept RAND royalties from any party implementing the standard. Its Microsoft demand was unreasonable, but it was a demand for monetary compensation as its entire relief for Microsoft’s implementation of the standard.

The admissions implicit in Motorola’s demands and in its RAND commitments are not affected by whether Motorola is a direct competitor of an alleged infringer. Even if Microsoft and Motorola were competitors with respect to a product at issue (e.g., computer operating system software), Motorola would have no right to carve out a competitor from its RAND commitment,29 and in any event it directed its unreasonable monetary demands to Microsoft.

Nor does it matter whether an alleged infringer refuses to pay a royalty or otherwise “breaches” a RAND obligation. Under general equitable principles, a breach of contract does not trigger a right to injunctive relief unless a money damage award will not adequately compensate the injured party.30 An alleged breach by Microsoft of the RAND contract (which Motorola argues has occurred) would simply trigger the question of what remedy is available to Motorola;31 it would not erase the admission implicit in Motorola’s demand. If money damages are adequate, as Motorola has admitted, injunctive relief is not among the permitted remedies for any such breach, or for infringement.

After the judge agreed with Microsoft, Microsoft's scheme was dealt a major blow, when the ITC ruled [PDF] that Apple had infringed a Samsung FRAND patent, and it ordered an injunction and a cease and desist order against Apple. So here, Microsoft turns down the volume on its no-injunction-ever language:

B. Whether RAND Commitments Preclude Injunctive
Relief In All Instances Is Not Presented by This
Appeal.

An injunction is not available as a remedy for patent infringement unless the equitable factors set out in eBay are satisfied. See 547 U.S. at 391–92. Whether the holder of a standard-essential patent with a RAND licensing commitment should be unable to obtain an injunction under all circumstances is an interesting question—but not a question presented in this appeal. First, the district court’s straightforward

24

application of eBay provides an adequate and independent basis for its decision. Second, the discussion of Motorola’s pursuit of an injunction makes clear that, contrary to Motorola’s suggestion, the district court was not considering and did not apply a blanket prohibition on injunctions:
To begin with Motorola’s injunctive claim, I don’t see how, given FRAND, I would be justified in enjoining Apple from infringing the ’898 unless Apple refuses to pay a royalty that meets the FRAND requirement.
A140 (emphasis added). The district court plainly did not announce a “bright-line rule permitting continued infringement” of Motorola’s patents. (Motorola Br. 64.)

Motorola supports its “bright-line rule” argument by asserting that the district court ignored its contentions that Apple had “consistently refused to take a FRAND license” (id.), which, according to Motorola, would have triggered the exception the district court recognized in the passage quoted above, showing that the court must have applied a “categorical rule.” But even if Apple has thus far “refused” to enter a license with Motorola, it has only rejected the terms Motorola claims are RAND—not any terms that the district court or any neutral arbiter found to satisfy Motorola’s RAND commitments.

25

To the extent that Motorola is suggesting that the injunction analysis and outcome in the case of standard-essential patents are necessarily identical to the analysis and outcome in the case of patents not subject to RAND commitments, Motorola is wrong, principally because it is ignoring eBay, which it purports to invoke. (Motorola Br. 66–67.) A court assessing whether to impose the equitable remedy of an injunction simply cannot ignore a patent owner’s RAND commitment,3 and its inherent concession that monetary compensation is wholly adequate for use of the patent by any implementer of the standard. Nor can or should a court ignore the fact that the patent owner has obtained the benefit of having its technology included in the standard—a benefit the patent owner otherwise likely would not have been able to obtain without violating the antitrust laws—because it made a representation that it was giving up its right to exclusivity. Finally, a court cannot

26

ignore the balanced public policies in play that permit SSOs, which would otherwise be subject to antitrust scrutiny, to lock segments of the market place into standards in exchange for the benefits of interoperability and reduced costs for consumers. To approach standard-essential patent injunction claims in the same manner as any other patent claim would lead to the precise hold up that the RAND commitment is intended to prevent. The Court should reject Motorola’s request that it proceed down that path in this case.

CONCLUSION

The Court should decline Motorola’s request that it decide questions not properly presented in this appeal, and affirm the denial of Motorola’s request for an injunction based on Motorola’s failure to satisfy eBay.
What does this mean? It means that Microsoft was wrong in its arguments before, and the ITC ruling demonstrated that. So now Microsoft argues that it's against the public interest for these particular Motorola FRAND patents to be able to get an injunction, and it claims Judge Posner's ruling doesn't mean that injunctions can never be justified.

I disagree that it's against the public interest. I mean, it's not in our interest if we want to use Linux and Android, because there is a game afoot. The goal is to create a tilted playing field, where Linux is disadvantaged. Microsoft would like to destroy the competition or at least make Android and Linux cost more, so they can continue to gouge their own customers and still remain competitive. Go to Google or to Amazon and search for Android laptop. Look at the prices. You can get one starting at less than $100. Then search for a Microsoft laptop. Look at the prices. A Microsoft Surface 64 GB is $699; a Surface Pro 64 GB tablet is $899; a 128 GB Pro "Windows 8 Tablet PC Laptop Ultrabook" is $1,069.99. See Microsoft's problem?

Plus Microsoft's hated Linux for many years. It's been attacking Linux as long as Groklaw has been around. Here's a small slice from the SCO history on Microsoft-funded attacks, just to show you I'm not making it up that Microsoft wanted to destroy Linux.

SCO's attack with copyrights didn't work out as they had hoped. Hence the patent smartphone wars. Patents are more powerful than copyrights. But Microsoft's dilemma is that it wasn't around when mobile phones were new and the standards were being established. It keeps telling the court in this brief that it owns standard essential patents too, but trust me, when it comes to early standard-essential patents, it is bringing a pen knife to a gun fight compared to Motorola. Motorola was there when mobile phones were new, and it helped build the technology, so when Microsoft started to go after Linux/Android vendors, folks like Motorola reached for their standard-essential patents to defend themselves and fight back. Microsoft would like to take that away from them, so it can then crush Android with its utility patents without fear. It's a shell game. That's why I snort when I hear Microsoft say all it is interested in is the public interest in standards.

What do you think? Is it in the public interest for there to be a tilted playing field that disadvantages Linux/Android? Or just in Microsoft's interest?

File that under Duh.

If Microsoft prevails, do you believe prices will go up? Or down? Will our choices narrow or broaden? Is a world without Linux in anybody's interest? What Microsoft also wants is not to have to pay the usual price, and ultimately it wants to force Google to pay a toll for using Linux in Android. Then Microsoft can survive without having to, you know, make phones and tablets people actually want to buy. Here's how Motorola explained what it's dealing with in the Seattle case with Microsoft's refusal to pay while simultaneously claiming no injunctive relief should be available to Motorola. Keep in mind that a German court had already ruled that Microsoft was infringing Motorola's patents and ordered an injunction, but Microsoft made an end run, getting the Seattle judge to block.

Does that seem fair to you? What kind of a marketplace is that?

I hope the court is wise enough to see through the oily FUD that this filing represents. Seattle wasn't. But the problem Microsoft has with its argument is that the ITC just ruled that Apple in fact should be blocked with an injunction regarding its infringement of a Samsung standard-essential patent. So how can Microsoft continue to pretend that everyone in the world agrees that there should be no injunctions for standard-essential patents? They don't agree, as Apple just found out after pursuing the same Microsoft playbook. The ITC Notice [PDF] said, "The Commission has determined that the public interest factors enumerated in section 337(d)(1) and (f)(1) do not preclude issuance of the limited exclusion order and cease and desist order. The Commission has determined that Samsung’s FRAND declarations do not preclude that remedy." That directly contradicts what Microsoft and its paid supporters have been telling courts and the world. Incidentally, that linked article is factually wrong. No one can say getting injunctions for FRAND patents is "universally outlawed", because that's not true. And Apple did *not* say that to the ITC. In fact the article goes on to ask Congress to outlaw them, as you can see with your own eyes, proving my point. And the ITC staff submitted a brief [PDF] in the case, stating that an exclusion order is perfectly appropriate in cases involving standards-essential patents, or SEPs.

Here's an article with more details, if you are curious as to what Apple really told the ITC, and with a link to the Apple filing, on the Essential Patent Blog. What they really said was they hoped FRAND patents couldn't be used for injunctions. It was their public interest argument. Or as Matt Rizzolo puts it, "Apple, on the other hand, argues that competitive conditions in the U.S. weigh in favor of no exclusion order issuing in this case."

Following in Microsoft's footsteps or partnering with them never seems to work out for anybody but Microsoft. Now Apple is using Bing for Siri. I mean... When you decide to use a lesser product because you are in litigation with the owner of the best, it means to me that Apple can no longer tell us that it's all about providing excellence for its customers. It's clearly not. Not any more. It's brand-tarnishing for Apple, in my view.

Microsoft's amicus brief, as text:

*********************

Nos. 2012-1548, -1549

___________________________

IN THE UNITED STATES COURT OF APPEALS
FOR THE FEDERAL CIRCUIT

_________________________

APPLE INC. AND NEXT SOFTWARE, INC.
(formerly known as NeXT Computer Inc.),

Plaintiffs-Appellants,

v.

MOTOROLA INC. (now known as Motorola Solutions, Inc.) AND
MOTOROLA MOBILITY, INC.,

Defendants-Cross-Appellants.

________________________

Appeals from the United States District Court for the Northern District
of Illinois in Case No. 11-CV-8540, Judge Richard A. Posner

______________________

BRIEF OF MICROSOFT CORPORATION
AS AMICUS CURIAE IN SUPPORT OF APPLE, INC.

_______________________

T. Andrew Culbert
David E. Killough
MICROSOFT CORPORATION
[address, phone]

Constantine L. Trela, Jr.
Richard A. Cederoth
Nathaniel C. Love
SIDLEY AUSTIN
[address, phone]

Attorneys for Amicus Curiae Microsoft Corporation

CERTIFICATE OF INTEREST

Counsel for Microsoft Corporation certifies the following: 1. The full name of every party or amicus curiae represented by me is:

Microsoft Corporation

2. The name of the real party in interest (if the parties named in the caption are not the real parties in interest) represented by me is:

N/A

3. All parent corporations and any publicly held companies that own 10 percent or more of the stock of the party or amicus curiae represented by me are:

None

4. The names of all law firms and the partners or associates that appeared for the party or amicus curiae now represented by me in the trial court or agency or are expected to appear in this Court are:

Constantine L. Trela, Jr.
Richard A. Cederoth
Nathaniel C. Love
SIDLEY AUSTIN LLP
[address]

T. Andrew Culbert
David E. Killough
MICROSOFT CORPORATION
[address]

Dated: March 20, 2013

Respectfully submitted,

/s/ Constantine L. Trela, Jr.
Constantine L. Trela, Jr.

Attorney for Microsoft Corporation

TABLE OF CONTENTS

STATEMENT OF INTEREST OF AMICUS CURIAE.............................1

SUMMARY OF ARGUMENT .................................................................... 3

ARGUMENT ............................................................................................... 4

I. Any Analysis of Standard-Essential Patents Must Consider the
RAND Commitment. ......................................................................... 4

A. Contractual RAND Commitments Impose Limitations on
Owners of Standard-Essential Patents................................... 5

B. Standard-Essential Patents As a Class Are “Extremely
Valuable” Only Because They Can Be Used to Hold Up
Implementers. ....................................................... 9

II. The Court Should Reject Motorola’s Proposed Approach to the
Valuation of a RAND Royalty for Standard-Essential Patents. ... 15
A. Motorola’s Proposed Approach Is Not Properly Presented
Because the District Court Rejected Motorola’s Damages
Theories on Grounds Unrelated to Standard-Essential
Patents. ..........................................................15

B. Motorola’s Arguments Advocating Hold-Up Valuation of
Standard-Essential Patents Should Be Rejected. ................ 17

III. The District Court Applied Settled Principles in Rejecting
Motorola’s Request for Injunctive Relief. ....................................... 23
A. The District Court Rejected Motorola’s Claim for Injunctive
Relief Based on eBay…………………………………23

B. Whether RAND Commitments Preclude Injunctive Relief In
All Instances Is Not Presented by This Appeal....................24

CONCLUSION .............................................. 27

ii

TABLE OF AUTHORITIES

Page(s)

Acumed LLC v. Stryker Corp.,
551 F.3d 1323 (Fed. Cir. 2008) ............................................................ 26

Allied Tube & Conduit Corp. v. Indian Head, Inc.,
486 U.S. 492 (1988)........................................................................5, 6, 7

Apple, Inc. v. Motorola Mobility, Inc.,
886 F. Supp. 2d 1061 (W.D. Wis. 2012) ................................................ 8

Broadcom Corp. v. Qualcomm, Inc.,
501 F.3d 297 (3d Cir. 2007) ....................................................... 7, 14, 19

eBay Inc. v. MercExchange, LLC,
547 U.S. 388 (2006)..........................................................................3, 24

eGrain Processing Corp. v. American Maize–Prods. Co.,
185 F.3d 1341 (Fed. Cir. 1999) ............................................................ 16

Hanson v. Alpine Valley Ski Area, Inc.,
718 F.2d 1075 (Fed. Cir. 1983) ............................................................ 16

LaserDynamics, Inc. v. Quanta Computer, Inc.,
694 F.3d 51 (Fed. Cir. 2012) .......................................................... 16, 18

Microsoft Corp. v. Motorola, Inc.,
696 F.3d 872 (9th Cir. 2012)............................................................8, 22

Microsoft Corp. v. Motorola, Inc.,
864 F. Supp. 2d 1023 (W.D. Wash. 2012) ............................................. 8

Realtek Semiconductor Corp. v. LSI Corp.,
No. C-12-03451, 2012 WL 4845628 (N.D. Cal. Oct. 10, 2012) ............. 8

Research in Motion, Ltd. v. Motorola, Inc.,
644 F. Supp. 2d 788 (N.D. Tex. 2008) ................................................. 14

iii

ResQNet.com, Inc. v. Lansa, Inc.,
594 F.3d 860 (Fed. Cir. 2010) .............................................................. 19

Synqor, Inc. v. Artesyn Tech., Inc..,
Nos. 2011-1191, -1192, -1194, 2012-1070, -1071, -1072
(Fed. Cir. March 7, 2013).....................................................................16

Whitserve LLC v. Computer Packages, Inc.,
694 F.3d 10 (Fed. Cir. 2012) ................................................................ 16

Zygo Corp. v. Wyko Corp.,
79 F.3d 1563 (Fed. Cir. 1996) .............................................................. 16

STATUTES

35 U.S.C. § 284........................................................... 18

OTHER AUTHORITIES

Stanley M. Besen and Joseph Farrell, “Choosing How to Compete:
Strategies and Tactics in Standardization,”
8 J. Econ. Persp. 117 (1994) ............................................................ 9, 10

Doug Lichtman, “Understanding the RAND Commitment,”
47 Hous. L. Rev. 1023, 1034 (2010) ................................................. 9, 10

Joseph Farrell et al., “Standard setting, patents, and hold-up,”
74 Antitrust L. J. 603 (2007) ................................................... 10, 12, 22

Herbert J. Hovenkamp, “Competition in Information
Technologies,” U. of Iowa Legal Studies Research Paper
No. 12-32 (Oct. 2012) .............................................. 22

Mark A. Lemley and Carl Shapiro, “Patent Holdup and Royalty
Stacking,” 85 Texas L. Rev. 1991 (2007) ....................................... 11, 13

Mark A. Lemley, “Intellectual Property Rights and Standard-
Setting Organizations,” 90 Cal. L. Rev. 1889 (2002)............................9

iv

Scott K. Peterson, “Consideration of Patents during the Setting of
Standards,” Remarks for Nov. 6, 2002 FTC and DOJ
Roundtable on SSOs (online at
http://www.ftc.gov/opp/intellect/021106peterson.pdf) .................. 10, 11

Carl Shapiro, “Navigating the Patent Thicket: Cross Licenses,
Patent Pools, and Standard-Setting,” in Adam B. Jaffe et al.,
Innovation Policy and the Economy (2001)..................................7

Daniel G. Swanson and William J. Baumol, “Reasonable and
Nondiscriminatory (RAND) Royalties, Standards Selection, and
Control of Market Power,” 73 Antitrust L. J. 1 (2005).......................11

v

STATEMENT OF INTEREST OF AMICUS CURIAE1

Microsoft Corporation (“Microsoft”) is a worldwide leader in computer technology. Microsoft holds—and licenses—U.S. and foreign patents declared essential to various technical standards (“standard-essential patents”) established by standard-setting organizations (“SSOs”). Like Plaintiffs-Appellants Apple, Inc. and NeXT Software, Inc. (“Apple”), Microsoft is also a defendant in actions in which Defendants-Cross-Appellants Motorola, Inc. (now known as Motorola Solutions, Inc.) and Motorola Mobility, Inc. (collectively, “Motorola”) allege that Microsoft infringes Motorola’s standard-essential patents.

As set out below, certain of the issues that Motorola asks this Court to address—including the proper method for setting a RAND royalty for standard-essential patents, and the circumstances, if any, in which injunctive relief may be available for infringement of such patents—although presented in other cases involving Motorola patents,

including cases involving Microsoft, are not in fact presented in this appeal. Beyond that, the positions Motorola asks this Court to adopt are contrary to law and inimical to sound public policy. Microsoft, therefore, has a direct interest in ensuring that this Court not accept Motorola’s invitation both: (i) to address matters not properly before the Court; and (ii) to do so in a misguided manner that is potentially harmful to the public interest.

Microsoft’s interest in this appeal goes beyond its interest as Motorola’s adversary in other cases involving standard-essential patents. While both Microsoft and Apple have publicly declared that they will not seek injunctions on standard-essential patents, other holders of such patents are, like Motorola, actively pursuing injunctions in both the federal courts and the International Trade Commission. As an active participant in many SSOs, as well as an implementer of many technical standards in its products, Microsoft has an interest in ensuring that these standards are broadly implemented, and that the public is able to reap the benefits of standardization. These aims would be frustrated by adoption of the approaches to injunctions and damages urged by Motorola.

2

SUMMARY OF ARGUMENT

Motorola asks this Court to decide issues related to standard-essential patents that are not presented in this case, but that are presented in Motorola’s other cases not now before the Court. The proper valuation of a RAND royalty for standard-essential patents, as a general proposition, is not presented here, because the district court excluded Motorola’s damages experts, not for reasons specific to standard-essential patents, but because the court found that they ignored relevant evidence, their disclosures did not comply with the Federal Rules, and they failed to offer any specific amount of damages. Likewise, whether injunctions should be categorically unavailable for standard-essential patents is also not presented here, for, contrary to Motorola’s argument, the district court expressly applied the equitable standard required by this Court’s precedent and eBay Inc. v. MercExchange, LLC, 547 U.S. 388 (2006), and found that Motorola could not satisfy that standard on the facts of this case.

Even if these questions were actually presented by this appeal, the positions Motorola asks the Court to adopt are wrong as a legal matter and terrible as a policy matter. Motorola misconceives the

3

“value” of a standard-essential patent, and attempts to sidestep the critical contract and antitrust principles that underlie and legitimize SSOs’ development of standards and the commitments to license patents on reasonable and nondiscriminatory terms and conditions (“RAND commitments”) made by SSO participants like Microsoft and Motorola.2 Motorola’s arguments concerning the valuation of RAND royalties for standard-essential patents reflect a flawed view of patent damages in the RAND context unsupported by the patent statute, case law, or logic. And Motorola’s arguments concerning injunctive relief ignore the important distinctions in legal obligations between standard-essential patents and patents not subject to a RAND commitment, and are inconsistent with the principles set forth in eBay and routinely applied by this Court.

ARGUMENT

I. Any Analysis of Standard-Essential Patents Must Consider
the RAND Commitment.

United States patents confer on patent owners a well-established bundle of rights, including the right to exclude others from using the

4

patented invention and the right to license, or not, entirely in the patent owner’s discretion and on whatever terms the patent owner desires and the market will bear. The law governing the assertion and enforcement of these rights is equally well established. When an infringement claim involves a patent declared essential to a standard and subject to a RAND commitment, however, additional considerations come into play. Contract and antitrust law substantially circumscribe the rights and remedies a patent owner otherwise might have, and the principles generally applied in patent litigation cannot be reflexively applied to standard-essential patents.

A. Contractual RAND Commitments Impose Limitations
on Owners of Standard-Essential Patents.

Many companies collaborate to create standardized technology. Although such collusive behavior could be problematic in many circumstances, the standardization of technology can provide enormous benefits to consumers and competitive markets. Nevertheless, “private standard-setting associations have traditionally been objects of antitrust scrutiny,” because, at root, standardization typically comprises both horizontal and vertical agreements to fix the technology that is available to consumers. Allied Tube & Conduit Corp. v. Indian

5

Head, Inc., 486 U.S. 492, 500 (1988). Such agreements exclude alternatives that would exist in the absence of the standard, potentially reducing consumer choice and constraining competition. Agreements to standardize also vest enormous market power in firms that control access to the technology. But the potential value to consumers of standardized technology and the resulting interoperability have been deemed to outweigh these evils. Id. at 500–01. Danger remains, however, for standardization creates a risk that owners of standard-essential patents will “hold up” or extort those that invest in implementing the standard, extracting royalties that reflect the value of standardization and far exceed the value of their own patents.

To avoid this danger, and antitrust scrutiny, SSOs require participants in the standard-setting process, like Microsoft, Apple, and Motorola, to follow specific licensing policies. Those licensing policies typically require participants to make RAND commitments, agreeing that any standard-essential patents they own will be made available on reasonable and nondiscriminatory terms to all those who use the standard. “[M]eaningful safeguards” against abuse, including RAND commitments, are the basis for the judge-made antitrust exemptions

6

under which SSO standard-setting processes operate. Broadcom Corp. v. Qualcomm, Inc., 501 F.3d 297, 309–10, 313–14 (3d Cir. 2007) (violation of RAND license commitment “is actionable anticompetitive conduct”); see Allied Tube, 486 U.S. at 501 (“When, however, private associations promulgate [standards] . . . through procedures that prevent the standard-setting process from being biased by members with economic interests in stifling product competition, those private standards can have significant procompetitive advantages.”) (citation omitted).

While requiring RAND commitments shelters SSOs from threshold antitrust scrutiny, a participating patent owner’s failure to abide by its RAND commitment may nonetheless result in significant harm to competition and consumers. Unreasonable or discriminatory pricing of standard-essential patents can be used to burden competitors, disadvantaging them or even effectively excluding them from the market for goods that make use of the standard, resulting in diminished choice and higher prices for consumers. See Carl Shapiro, “Navigating the Patent Thicket: Cross Licenses, Patent Pools, and Standard- Setting,” in Adam B. Jaffe et al., Innovation Policy and the Economy

7

(2001) 128, 150 (“Antitrust risks associated with excluding a rival from the market . . . could arise if the companies promoting the standard block others from adhering to the standard or seek royalties from outsiders.”).

Given these concerns, it is unsurprising that courts have widely recognized that RAND commitments are enforceable contracts, and that standard-implementers are third-party beneficiaries entitled to enforce those commitments. See Microsoft Corp. v. Motorola, Inc., 696 F.3d 872, 884–85 (9th Cir. 2012); Microsoft Corp. v. Motorola, Inc., 864 F. Supp. 2d 1023, 1030 (W.D. Wash. 2012); Apple, Inc. v. Motorola Mobility, Inc., 886 F. Supp. 2d 1061, 1085 (W.D. Wis. 2012); Realtek Semiconductor Corp. v. LSI Corp., No. C-12-03451, 2012 WL 4845628, at *4 (N.D. Cal. Oct. 10, 2012). The judicially-enforceable RAND commitment—an unequivocal contractual commitment to license a patent to anyone on reasonable terms and conditions—is a substantial relinquishment of the right to exclude, and the right to extract whatever royalties the market will bear, that is presumed elsewhere in patent law.

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B. Standard-Essential Patents As a Class Are “Extremely
Valuable” Only Because They Can Be Used to Hold Up
Implementers.

Contrary to the implications of terminology like “technical standards” and “standard-essential,” establishing an interoperability standard is not a rigorous, scientific process driven by identifying the “best” technology in a particular field. See Doug Lichtman, “Understanding the RAND Commitment,” 47 Hous. L. Rev. 1023, 1034 (2010) (noting, by analogy, that once a default rule was established, “a patent related to the idea of driving on the left was worth very little. A patent related to the idea of driving on the right was worth a fortune. The change had nothing to do with the relative merits of these two technologies.”); Mark A. Lemley, “Intellectual Property Rights and Standard-Setting Organizations,” 90 Cal. L. Rev. 1889, 1897 (2002) (“[I]t may be more important that an industry coalesces around a single standard than which particular standard is chosen.”); Stanley M. Besen and Joseph Farrell, “Choosing How to Compete: Strategies and Tactics in Standardization,” 8 J. Econ. Persp. 117, 118 (1994) (noting that in standard-setting “victory need not go to the better or cheaper product: an inferior product may be able to defeat a superior one”).

9

SSOs do not necessarily canvass the technical literature, nor do they pick and choose among patents for ideas to incorporate into their standards. Rather, technology is included in a standard through a collaborative process that draws heavily on prior standards, and may or may not involve evaluation of or selection among competing technical approaches. See Joseph Farrell et al., “Standard setting, patents, and hold-up,” 74 Antitrust L. J. 603, 617 (2007) (SSO processes are “slow to move, rely on consensus, and typically . . . work on more advanced standards that build upon the prior standard”); Besen and Farrell, 8 J. Econ. Persp. at 118–19 (“Because buyers want compatibility with the installed base, better products that arrive later may be unable to displace poorer, but earlier standards.”).

The SSO process rarely involves any inquiry as to whether an approach under consideration might arguably be covered by any patents. See Lichtman, 47 Hous. L. Rev. at 1028 (“[S]tandard-setting is a process run by engineers, not lawyers.”); Scott K. Peterson, “Consideration of Patents during the Setting of Standards,” Remarks for Nov. 6, 2002 FTC and DOJ Roundtable on SSOs (online at http://www.ftc.gov/opp/intellect/021106peterson.pdf) at 8

10

(“[C]onsideration of patent issues requires expertise that is not part of the background of those who are typically most directly involved in the standards setting activities.”). Standardization involves consensus, compromises, and practical concessions that preclude any assumption that a particular aspect of a standard reflects “the best available solution” for the subject being addressed. See Mark A. Lemley and Carl Shapiro, “Patent Holdup and Royalty Stacking,” 85 Texas L. Rev. 1991, 2016 (2007) (standardization in SSOs involves “consensus and compromise”); Peterson, supra, at 3 (discussing “the likelihood that a patented solution will offer significant advantage over alternatives,” and noting that “[o]ften a protocol can be implemented in many ways that have similar performance” for the standard under consideration).

Pursuant to SSO policies, participants typically are required to make a RAND commitment—i.e., agree that, if the standard is adopted, they will license any standard-essential patents they own on reasonable and non-discriminatory terms to anyone seeking to implement the standard. A137; see Daniel G. Swanson and William J. Baumol, “Reasonable and Nondiscriminatory (RAND) Royalties, Standards Selection, and Control of Market Power,” 73 Antitrust L. J. 1, 5 (2005).

11

Blanket declarations to license any such patents are typical, although patent owners may instead identify, or “declare,” particular patents that they believe must be used in order to practice the proposed standard. See Farrell et al., 74 Antitrust L. J. at 624–25. If a patent owner refuses to make a RAND commitment, the SSOs may modify or abandon the proposed standard to avoid conferring exclusionary power on the patent owner. At no point in this process, however, does the SSO or any other entity ever evaluate declared-essential patents to determine whether they actually are essential to any standard. A137.

By participating in SSOs, and convincing them to include in their standards technical approaches that a patent owner believes are covered by its technology, a patent owner can secure wide adoption of its technology and reduce the risk that its technology will quickly become obsolete, as often happens in fast-moving, high-tech industries. At the same time, if the patentee’s assertions of essentiality are correct, the patentee effectively binds those who wish to implement the industry standard to use, and thereby infringe, its standard-essential patents.

As a result, if a patent is truly essential to a standard, the value of that patent—which may pertain to a minuscule and insignificant aspect

12

of the standard—is tied up in the value of the overall standard to implementers, a value that has nothing to do with the value of the innovation captured in the particular patent’s claims, or the importance of that technology to the standard. See Lemley and Shapiro, 85 Texas L. Rev. at 2009 (“The technology does not have any greater inherent value when used as part of an industry standard, but the patent holder can demand [multiple] times as much money once the industry has made irreversible investments.”). Regardless of the patent’s intrinsic value or its value to the standard, an implementer must infringe the essential patent if it wishes to implement the standard. That is the only sense in which Motorola’s claim that “patents essential to a [technical] standard are extremely valuable” is correct. (Responsive and Opening Brief of Appellees-Cross-Appellants Motorola Mobility LLC and Motorola Solutions, Inc. (“Motorola Br.”) 3.)

But a patentee’s attempt to capture the value conferred by standardization itself, as opposed to the technical value of the invention apart from standardization, is the precise “patent hold up” that RAND commitments are designed to prevent:

An [SSO] may complete its lengthy process of evaluating technologies and adopting a new standard, only to discover

13

that certain technologies essential to implementing the standard are patented. When this occurs, the patent holder is in a position to “hold up” industry participants from implementing the standard. Industry participants who have invested significant resources developing products and technologies that conform to the standard will find it prohibitively expensive to abandon their investment and switch to another standard. They will have become “locked in” to the standard. In this unique position of bargaining power, the patent holder may be able to extract supracompetitive royalties from the industry participants.
Broadcom, 501 F.3d at 310; see also id. at 312 (explaining that standards-adopters “rely on structural protections . . . to facilitate competition and constrain the exercise of monopoly power”). Motorola itself has been accused of attempting to extract just such supracompetitive royalties from standards implementers. See, e.g., Research in Motion, Ltd. v. Motorola, Inc., 644 F. Supp. 2d 788, 791, 794 (N.D. Tex. 2008) (denying motion to dismiss antitrust complaint alleging that “Motorola’s possession of an essential patent has turned Motorola into a gatekeeper” giving it the power to license “only at exorbitant rates”). Any attempt to fashion remedies for infringement of a standard-essential patent therefore must recognize the relevant characteristics of such patents and of the standard-setting process.

14

II. The Court Should Reject Motorola’s Proposed Approach to
the Valuation of a RAND Royalty for Standard-Essential
Patents.

A. Motorola’s Proposed Approach Is Not Properly
Presented Because the District Court Rejected
Motorola’s Damages Theories on Grounds Unrelated
to Standard-Essential Patents.

In its May 22, 2012 Daubert order, the district court excluded Motorola’s damages expert Carla Mulhern because she failed to consider the alternatives available to Apple at the time of the hypothetical negotiation. A119–21 (“Her failure to analyze Apple’s alternative of contracting with Verizon marks her approach to calculating a reasonable royalty for Apple’s cellular patents as unreliable; and she offers no backup estimate based on a reliable methodology.”). Mulhern’s theory evidently posited that Apple would pay Motorola $347 million for a license enabling it to launch its iPhone on AT&T’s network—even though Apple could have struck an alternative deal with Verizon, upon whose network Apple’s iPhones would not infringe. A120. While, as the district court acknowledged, the Verizon alternative might have been inferior in some respects, Mulhern evidently made no attempt to quantify such differences in

15

value or to provide any other explanation as to why Apple would have agreed to pay so much. A119–21.

In excluding Mulhern’s testimony on this basis, the district court did nothing more than apply this Court’s precedents, which require damages theories “based on sound economic and factual predicates,” LaserDynamics, Inc. v. Quanta Computer, Inc., 694 F.3d 51, 67 (Fed. Cir. 2012), exclude those “out of line with economic reality,” Whitserve LLC v. Computer Packages, Inc., 694 F.3d 10, 31 (Fed. Cir. 2012), and have long endorsed consideration of alternatives available at the time of the hypothetical negotiation, regardless of whether the alternatives are exact substitutes for the allegedly infringing technology. See Synqor, Inc. v. Artesyn Tech., Inc.., Nos. 2011-1191, -1192, -1194, 2012-1070, -1071, -1072, slip op. at 21 (Fed. Cir. March 7, 2013) (“[T]he analysis must consider the impact of such alternative technologies on the market as a whole.”); eGrain Processing Corp. v. American Maize–Prods. Co., 185 F.3d 1341, 1347 (Fed. Cir. 1999); Zygo Corp. v. Wyko Corp., 79 F.3d 1563, 1571–72 (Fed. Cir. 1996); Hanson v. Alpine Valley Ski Area, Inc., 718 F.2d 1075, 1081–82 (Fed. Cir. 1983).

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Following the exclusion of Mulhern, Motorola relied on a declaration by Charles R. Donohoe, another of its experts. A137. Donohoe had not submitted a formal report as required by Fed. R. Civ. P. 26(a)(2)(B), and his 8-page declaration suggested only that Apple should pay “up to” $350 million. A138. The district court found that Donohoe made no reference to the patent Apple was actually alleged to infringe, or to the standard to which it was allegedly essential, and had given inconsistent deposition testimony suggesting he really meant Apple should pay more than $350 million. A138–39. The court found that Donohoe’s proposed testimony was insufficient to establish Motorola’s damages. A138–40.

Based on this record, the district court refused to allow Motorola to proceed. Microsoft takes no position as to whether this decision was correct. What is clear, however, is that this decision had nothing to do with the valuation of a RAND royalty for standard-essential patents.

B. Motorola’s Arguments Advocating Hold-Up Valuation
of Standard-Essential Patents Should Be Rejected.

Even if the valuation of a RAND royalty for standard-essential patents were presented in this appeal, the position Motorola asks this Court to adopt is wrong as a legal matter, and rests on a flawed, rigid

17

view of patent damages that is without support in the statute, case law, or logic.

The patent damages statute provides for a reasonable royalty, but does not require that the parties employ a hypothetical negotiation or any other particular method for computing that royalty. 35 U.S.C. § 284. Instead, as this Court has reemphasized repeatedly, courts must apply “sound economic and factual predicates” to “discern the value of the patented technology to the parties in the marketplace.” LaserDynamics, 694 F.3d at 67, 76. Accordingly, patent damages must be based on the value of the patent itself, not on extraneous factors.

A “reasonable royalty” in a case involving a standard-essential patent, therefore, must be a royalty that reflects the actual value of the patent, not the value conferred by the inclusion of the patent in a standard. More bluntly, a “reasonable royalty” is not the value of an agreement among competitors that would, but for the RAND commitment, constitute a blatant antitrust violation and provide the patentee with compensation far in excess of any actual contribution to the “useful arts.” Recognizing these principles, the district court, having already rejected Motorola’s damages theories, observed that:

18

[O]nce a patent becomes essential to a standard, the patentee’s bargaining power surges because a prospective licensee has no alternative to licensing the patent; he is at the patentee’s mercy. The purpose of the FRAND requirements, the validity of which Motorola doesn’t question, is to confine the patentee’s royalty demand to the value conferred by the patent itself as distinct from the additional value—the hold-up value—conferred by the patent’s being designated as standard-essential.
A140. See also Broadcom, 501 F.3d at 310, 312. Motorola complains that this approach “would value the patent years before infringement and would set the value before the technology had been tested in the market-place.” (Motorola Br. 60.) But that is exactly the point of the approach described by the district court—valuing the patent after its inclusion in the standard would make it impossible to “tie proof of damages to the claimed invention’s footprint in the market place,” ResQNet.com, Inc. v. Lansa, Inc., 594 F.3d 860, 869 (Fed. Cir. 2010), as opposed to the standard’s “footprint in the market place.” (See supra at 9–13.)

Indeed, Motorola openly acknowledges that it seeks to capture the value bestowed by standardization:

Evaluating the patent only before the standard is released pegs the patent’s value years before the hypothetical negotiation, when it may have been worth considerably less than it became after the standard was implemented.

19

(Motorola Br. 60 (emphasis added).) Motorola thus is urging this Court to endorse its efforts to recover as supposed “reasonable royalties” in a patent case supracompetitive, hold-up royalties recognized as impermissible under antitrust and contract law. The Court should decline the invitation, particularly in a case in which the issue is not even properly presented.

Motorola also insists that it should have been permitted to rely on Donohoe’s theory of disproportionately-high royalties for a single patent from a portfolio of standard-essential patents, coupled with testimony concerning its portfolio licensing practices. (Motorola Br. 62–63.) Motorola’s theory is based entirely on self-serving claims: it has announced a “2.25% standard royalty rate” for any of its standard-essential patent portfolios (id. at 56), and Donohoe believed that any single patent (regardless of which one) from that portfolio “would command” 40 to 50 percent of the portfolio rate (id. at 62), apparently due to Motorola’s stated preference to force licensees to take a license to its entire portfolio of patents it claims are essential to the relevant standard.

20

As Motorola conceded in the district court, it would be difficult and expensive for it to prove that the rest of the patents in its portfolio were actually essential, valid, and infringed by standard-implementers. A139–40. So Motorola contends it should be permitted to collect half (if not more) of its self-declared royalty entitlement by establishing infringement of just any one of the patents in its portfolio. A139–40. That damages theory, by Motorola’s own admission, bears no connection to the value of the patent in question, and reflects “economic reality” only in the sense that Motorola likely could extract that much from a licensee if its demands were backed by the threat of an injunction that would bar the licensee from implementing the entire standard.

Motorola also sought to rely on past licenses for its standard-essential patents (Motorola Br. 60), but those licenses could not provide reliable indications of a reasonable royalty. As Motorola describes its own practices for licensing standard-essential patents—including its pursuit of injunctions against implementers—those licenses necessarily reflect the value of the standard, not the value of Motorola’s patents. Reliance on past licenses for standard-essential patents would only translate improper leverage exerted in the past to the present, where

21

courts, administrative agencies, and commentators are increasingly (and properly) recognizing that RAND commitments are inconsistent with the tactic of using injunctive leverage to extract hold-up royalties. See, e.g., Microsoft Corp., 696 F.3d at 885 (“[I]t could well be that retrospective payment at the rate ultimately determined and a determination of the future rate, not an injunction banning sales while that rate is determined, is the only remedy consistent with the contractual commitment to license users of [ ] standard-essential patents.”); Brief of Amicus Curiae Federal Trade Commission Supporting Neither Party at 5–7; Herbert J. Hovenkamp, “Competition in Information Technologies,” U. of Iowa Legal Studies Research Paper No. 12-32 at 15 (Oct. 2012) (“Permitting the owner of a FRAND-encumbered patent to have an injunction against someone willing to pay FRAND royalties is tantamount to making the patent holder the dictator of the royalties, which once again is the same thing as no FRAND commitment at all.”); Farrell et al., 74 Antitrust L. J. at 638 (“[A] patent holder that has made a commitment to license on a FRAND basis should not be able to get (or threaten) an injunction against use of the technology to comply with the standard.”).

22

III. The District Court Applied Settled Principles in Rejecting
Motorola’s Request for Injunctive Relief.

Motorola’s contention that the district court imposed an impermissible “categorical rule” in denying injunctive relief and failed to apply eBay cannot be squared with the court’s own words. Again, Motorola’s goal seems to be to invite this Court to address an issue not presented by this appeal, but presented in Motorola’s other cases. The Court should decline Motorola’s invitation.

A. The District Court Rejected Motorola’s Claim for
Injunctive Relief Based on eBay.

The district court explicitly applied eBay and found that Motorola had made a contractual commitment to accept royalty payments from any licensee—meaning that Motorola had acknowledged that monetary damages would be adequate. The district court observed that:
[b]y committing to license its patents on FRAND terms, Motorola committed to license the ’898 to anyone willing to pay a FRAND royalty and thus implicitly acknowledged that a royalty is adequate compensation for a license to use that patent.
A140–41. Then, based on its assessment of the relevant eBay factors, the district court exercised its discretion to deny an injunction:
[T]he Supreme Court has held that the standard for deciding whether to grant such relief in patent cases is the normal equity standard. eBay Inc. v. MercExchange, L.L.C.,

23

[citation omitted]. And that means, with immaterial exceptions, that the alternative of monetary relief must be inadequate. [Citations omitted]. A FRAND royalty would provide all the relief to which Motorola would be entitled if it proved infringement of the ’898 patent, and thus it is not entitled to an injunction.
A143. Motorola had promised the relevant SSOs that it would accept reasonable and nondiscriminatory royalty payments in exchange for the use of its patents by anyone. Motorola participated in the formation of these standards, clearly intending that they would be broadly adopted— and if its claims of essentiality are correct, that its patents would be widely used by hundreds, if not thousands, of implementers. Monetary compensation for that use is more than just adequate: it is exactly what Motorola contracted for when it made its RAND commitment.

B. Whether RAND Commitments Preclude Injunctive
Relief In All Instances Is Not Presented by This
Appeal.

An injunction is not available as a remedy for patent infringement unless the equitable factors set out in eBay are satisfied. See 547 U.S. at 391–92. Whether the holder of a standard-essential patent with a RAND licensing commitment should be unable to obtain an injunction under all circumstances is an interesting question—but not a question presented in this appeal. First, the district court’s straightforward

24

application of eBay provides an adequate and independent basis for its decision. Second, the discussion of Motorola’s pursuit of an injunction makes clear that, contrary to Motorola’s suggestion, the district court was not considering and did not apply a blanket prohibition on injunctions:
To begin with Motorola’s injunctive claim, I don’t see how, given FRAND, I would be justified in enjoining Apple from infringing the ’898 unless Apple refuses to pay a royalty that meets the FRAND requirement.
A140 (emphasis added). The district court plainly did not announce a “bright-line rule permitting continued infringement” of Motorola’s patents. (Motorola Br. 64.)

Motorola supports its “bright-line rule” argument by asserting that the district court ignored its contentions that Apple had “consistently refused to take a FRAND license” (id.), which, according to Motorola, would have triggered the exception the district court recognized in the passage quoted above, showing that the court must have applied a “categorical rule.” But even if Apple has thus far “refused” to enter a license with Motorola, it has only rejected the terms Motorola claims are RAND—not any terms that the district court or any neutral arbiter found to satisfy Motorola’s RAND commitments.

25

To the extent that Motorola is suggesting that the injunction analysis and outcome in the case of standard-essential patents are necessarily identical to the analysis and outcome in the case of patents not subject to RAND commitments, Motorola is wrong, principally because it is ignoring eBay, which it purports to invoke. (Motorola Br. 66–67.) A court assessing whether to impose the equitable remedy of an injunction simply cannot ignore a patent owner’s RAND commitment,3 and its inherent concession that monetary compensation is wholly adequate for use of the patent by any implementer of the standard. Nor can or should a court ignore the fact that the patent owner has obtained the benefit of having its technology included in the standard—a benefit the patent owner otherwise likely would not have been able to obtain without violating the antitrust laws—because it made a representation that it was giving up its right to exclusivity. Finally, a court cannot

26

ignore the balanced public policies in play that permit SSOs, which would otherwise be subject to antitrust scrutiny, to lock segments of the market place into standards in exchange for the benefits of interoperability and reduced costs for consumers. To approach standard-essential patent injunction claims in the same manner as any other patent claim would lead to the precise hold up that the RAND commitment is intended to prevent. The Court should reject Motorola’s request that it proceed down that path in this case.

CONCLUSION

The Court should decline Motorola’s request that it decide questions not properly presented in this appeal, and affirm the denial of Motorola’s request for an injunction based on Motorola’s failure to satisfy eBay.

27

DATED: Chicago, IL
March 20, 2013.

SIDLEY AUSTIN LLP

By: /s/ Constantine L. Trela, Jr.
Constantine L. Trela, Jr.

Constantine L. Trela, Jr.
Richard A. Cederoth
Nathaniel C. Love
SIDLEY AUSTIN LLP
[address, phone]

T. Andrew Culbert
David E. Killough
MICROSOFT CORPORATION
[address, phone]

__________
1 Microsoft submits this brief as an amicus curiae pursuant to Fed. R. App. Pro. 29(a) and Circuit Rule 29(c). Plaintiffs-Appellants and Defendants-Cross-Appellants consent to the filing of this brief. Microsoft has submitted an unopposed motion requesting leave to file this brief. No party or party’s counsel authored the brief in whole or in part or contributed money intended to fund preparing or submitting it and no person other than amicus curiae contributed money intended to fund its preparation or submission.

2 Some SSOs use the acronym “FRAND,” where the additional “F” stands for “fair.” RAND and FRAND are generally recognized as synonyms.

3 While this Court has noted that prior licensing “is but one factor for the district court to consider,” Acumed LLC v. Stryker Corp., 551 F.3d 1323, 1328 (Fed. Cir. 2008), the RAND commitment is not a single prior license—it is an enforceable, contractual commitment on the part of the patentee to license its patents to anyone in exchange for RAND royalties, a commitment that remains ongoing throughout the life of the standard.

28

[PJ: For CERTIFICATE OF COMPLIANCE and CERTIFICATE OF SERVICE, please see the PDF.]

28-29


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