Microsoft v. Motorola and Google (9th Cir. 2015)
In a well written decision, the 9th Circuit has affirmed the lower court ruling that Motorola/Google owes $14 million to Microsoft for failing to live-up to its RAND commitments. Although Motorola (now Google) committed several WiFi-essential patents to Reasonable and Non-Discriminatory (RAND) licensing, it later demanded that Microsoft pay a hefty royalty rate lest it be blocked from using WiFi. Those demands from Motorola should more properly be seen as a counter-offensive prompted by Microsoft’s demands for royalties on every Android implementation.
The basic rulings: (1) affirming that Motorola had breached its RAND good faith and fair dealing obligations in its dealings with the third-party-beneficiary Microsoft – resulting in $14.5 million in damages; (2) affirming that the district court had not erred in determining the RAND royalty rate at a few cents per device (rather than the few dollars per device requested by Motorola). The court previously agreed to hear the case (rather than the Federal Circuit) and that prior finding was left undisturbed based upon the “law of the case.”
The damages here are interesting.
Motorola had challenged the district court’s RAND royalty determination as failing to follow Federal Circuit damages precedent. On appeal, the 9th Circuit held that neither Federal Circuit precedent nor the Patent Act requirement of “a reasonable royalty” floor control because the RAND rate is a contract obligation rather than a patent damage. That said, the 9th Circuit did agree that the Georgia-Pacific factors are helpful in guiding the analysis.
The $14 million breach-of-contract damages actually stemmed from Motorola’s infringement action filed in Germany. When that lawsuit was filed, Microsoft quickly relocated its infringing European distribution center to the Netherlands (at a cost of several million dollars). The German court did grant an injunction against Microsoft’s ongoing infringement in Germany. Back in the U.S. the district court determined that the German action (and demand for injunctive relief) was a breach of Motorola’s RAND agreement and awarded Microsoft $11 million to compensate for moving its distribution center and $3 million in attorney fees for having to fight the legal battle in Germany. Those findings have now been affirmed by the 9th Circuit.
Motorola argued that the U.S. policy of open access to the courts should bar liability for consequential damages associated with filing a lawsuit. That argument is embodied by the Noerr-Pennington doctrine that shields parties from liability for simply engaging in litigation. Here, however, the 9th Circuit found the doctrine inapplicable when contractual obligations bar certain litigation strategies — here, in particular, the RAND agreement was seen as barring any request for injunctive relief.
Overall, the outcome provides power to RAND/FRAND agreements – proving that they provide significant assurances to third parties on a global scale.