Standards Patent Licensing: Always Apportionment, Sometimes Stacking

Morrison & Foerster LLP

What is a Fair, Reasonable, and Non-Discriminatory (FRAND) royalty for a few patents essential to practicing a technical standard like WiFi and how should the jury in such a case be instructed on damages? The Federal Circuit addressed these questions in Ericsson, Inc. et al. v. D-Link Systems, Inc. et al. (Fed. Cir. Dec. 4, 2014). The answer is that the jury should be instructed to base royalties on the contribution of the patents-in-suit to the standard-practicing component and the contribution of that component to the accused product as a whole. The jury should not, however, be instructed to consider whether the aggregate royalty “stack” for the standard as a whole would be reasonable if all standard patent owners charged similar royalties – unless there is evidence that royalties are already in fact starting to stack up.

Patent owner Ericsson sued D-Link Systems and other implementers for infringing three patents relating to the WiFi standard. The jury found that D-Link infringed and awarded a royalty of fifteen cents per unit. The district court upheld the jury’s decision. The Federal Circuit affirmed most of the liability findings but vacated the damages award and remanded.

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