Ericsson, Inc. v. D-Link Systems, Inc.

773 F.3d 1201 (2014)

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Nature of the Case

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Facts

Standards development organizations (SDOs) publish standards, which are lists of technical requirements. Compliance with these technical requirements ensures interoperability among compliant devices. The Institute of Electrical and Electronics Engineers, Inc. (IEEE) publishes the 802.11 standards, more commonly known as 'Wi-Fi.' The 802.11 standard is the prevailing wireless internet standard and has already reached widespread adoption. The chosen standard may include technology developed by a number of different parties. Sometimes that technology is covered by patents. Compliant devices necessarily infringe certain claims in patents that cover technology incorporated into the standard. These patents are called 'standard essential patents' (SEPs). Patent hold-up exists when the holder of a SEP demands excessive royalties after companies are locked into using a standard. Royalty stacking can arise when a standard implicates numerous patents, perhaps hundreds, if not thousands. If companies are forced to pay royalties to all SEP holders, the royalties will 'stack' on top of each other and may become excessive in the aggregate. SDOs get assurances from patent owners before publishing the standard. IEEE, for example, asks SEP owners to pledge that they will grant licenses to an unrestricted number of applicants on 'reasonable, and non-discriminatory' (RAND) terms. Ericsson (P) promised to offer licenses for all of its 802.11(n) SEPs at a RAND rate via letters of assurance to the IEEE. This commitment is binding on P. D produces a variety of electronic devices, including laptop computers and routers, which incorporate 802.11(n) wireless chips made by Intel. Because all of these end products incorporate 802.11(n)-compliant chips, they must be capable of the functionality mandated by the 802.11(n) standard. P filed suit accusing D of infringing nine patents that were essential to the 802.11(n) wireless standard. Intel, the wireless internet chip supplier for the accused products, intervened. After a 7-day jury trial, the jury found that D infringed three of D's patents. The jury awarded P approximately $10 million-roughly 15 cents per infringing device. After the jury trial, the trial court conducted a separate bench trial regarding several RAND issues. D filed a motion for judgment as a matter of law and a new trial, arguing that the jury's findings of infringement and no invalidity, as well as its damages award, were not supported by substantial evidence. D asserted that the jury was inadequately instructed regarding P's RAND obligation. D appealed, arguing, in part, that the jury should have been instructed on patent hold-up and royalty stacking.