TechIPm Research

1. Standard Essential Patents
Licensing Royalty Disputes
4Q. 2013
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2. 1. Main Causes of FRAND Licensing Royalty Disputes
In Apple, Inc. v. Motorola, Inc., No. 1:11-cv-08540 (N.D. Ill. 2012), Dkt. No. 1038
at 18, the court ruled that a FRAND royalty should not reflect the ex post hold
up value that standard essential patens (SEPs) acquired after a standardized te
chnology was adopted widely in the relevant technology market.
Thus, the FRAND royalty can be a measure of value the implementer can
obtain by adopting the standardized technology over available alternatives at
the time the standard was specified.
In other words, FRAND royalty can be the maximum royalty amount that a
licensee would be willing to pay in return for the incremental profit produced by
implementing the patented standardized technology over the alternatives.
Therefore, hypothetical negotiation framework to determine FRAND royalty
subject to the incremental value over alternatives at the time the standard was
specified can be applied.
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3. 1. Main Causes of FRAND Licensing Royalty Disputes
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Motorola argued that a FRAND royalty should be determined as a reasonable
royalty based on a hypothetical negotiation at the time of infringement because
the damages adequate to compensate would be damages that place the
patentee in the position it would have been but for the infringement.
Motorola also argued that the FRAND royalty can be measured from a
comparable licensing price in the relevant licensing marketplace.
On the other hand, Apple argued that market value for FRAND royalty could not
be used as providing the reliable FRAND royalty levels unless the comparable
licensing royalty has not been affected by enhanced market power of SEPs.
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4. 2. Arguments against the Court’s FRAND Royalty
Qualcomm insisted that there is nothing wrong with the licensing practice of
using the price of the entire end product as the appropriate royalty base,
because licensing at the end user device level has been an industry custom in
the telecommunications sector.
By the telecommunications industry custom, Qualcomm explained that
patentees of SEPs usually did not enforce licensing obligation to component
manufactures. Therefore, FRAND royalty base cannot be the smallest saleable
component that embodies the relevant SEPs.
Additionally, Qualcomm reasoned that the contribution of the patented feature
to consumer demand should not be limited to components of devices because
extended consumers’ benefits are coming from the services provided by the
network connecting devices.
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5. 2. Arguments against the Court’s FRAND Royalty
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Therefore, the smallest saleable component that embodies the relevant SEPs is
actually the device itself in the telecommunications sector. Furthermore,
developing standard technology in mobile telecommunications is a high-risk
business.
Thus, without strong patent protection and return for R&D, there will be no
encouragement for further investment in telecommunications standards.
Consequently, artificially diminished royalties on mobile telecommunications
standard-compatible products will impede innovation, and thus, harm to the
industry and consumers ultimately.
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6. 2. Arguments in favor of the Court’s FRAND Royalty
Cisco, HP, and several other IT companies argued that the use of the entire
market value as a royalty base should not be used unless all of the profit of the
infringing product is attributed to the features of SEPs.
Thus, the value of SEPs should be determined by apportion to the contribution
actually the patented features made to the accused product. They also insisted
that patentees bear the burden of proof for the value of SEPs.
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7. Thank you!
• If you have any questions
please contact Dr. Alex G. Lee
at alexglee@techipm.com
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8. Company Overview
TechIPm, LLC is a professional research and consulting company specializing in
technology and intellectual property mining and management.
Technology Expertise
• Mobile Computing & Wireless Communications Technology: LTE, UMTS,
WLAN, WPAN, RFID, NFC, WSN, Cognitive Radio/SDR, M2M, Mobile TV etc.
• Smartphone Applications: Location Base Services/Indoor Navigations, Mobile
Payments, Augmented Reality, Wireless/Mobile UI/UX etc.
IP Expertise
• Strategic Patent Evaluation & Valuation: M&A Patent Due Diligence,
Acquisition Feasibility Analysis, Investment Valuation
• Patent Portfolio Analysis & Development: Design Around Strategy,
Essentiality & Claim Development for Standard Essential Patents
• Patent Litigation Strategy: Evidence of Use, Claim Construction Strategy
• Patent Prosecution: U.S. Provisional Filing, U.S. Non-provisional Prosecution,
International Prosecution (PCT and Foreign Offices)
• Patent Business Strategy: Licensing/Monetization Strategy, IP Intelligence
• Patent Analysis: Patentability, Freedom-to-Operate, Infringement, Validity
Analysis, Patent Mining for Strategic Planning
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9. Major Clients
Technology management professionals planning, developing, and
investing in new technologies/products/services.
In-house IP counsels developing patent strategy.
Licensing professionals looking for a new licensing opportunities.
High-tech investment management firms/banks.
IP monetization/management consulting firms.
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10. 4G LTE Standard Essential Patent Candidates
Data 2Q 2013
LTE Standard Essential Patent Candidates Data 2Q 2013 is a product based on
LTE patents research for US market leader among LTE UE (cellular phones,
smart phones, PDAs, mobile PCs, etc.) and base station (eNB) product
manufactures. LTE Essential Patent Candidates Data provides MS excel file for
assignee, patent (publication) number, prosecution status for published
applications, related 3GPP TS36 Release 10 specifications, and the key
technology components for an implementation of the products.
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11. References
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