reasonable and non-discriminatory terms

On February 15, a Texas federal jury found that Ericsson did not breach its obligation to offer HTC licenses to its standard-essential patents (SEPs) on fair, reasonable and non-discriminatory (FRAND) terms. The verdict ended a nearly two-year dispute as to whether FRAND obligations preclude a licensing offer based on end products rather than components. Ericsson succeeded in convincing the jury that its FRAND commitment does not require it to base royalty rates for its SEPs on the value of smartphone chips rather than the phones themselves. The jury verdict suggests that other SEP holders may be able to successfully argue that basing royalty rates on end products rather than components does not violate their FRAND obligations.

Ericsson holds patents that the parties agreed are essential to the 2G, 3G, 4G and WLAN wireless communication standards, and made a commitment to several standard setting organizations to license those SEPs on FRAND terms. HTC makes smartphones that implement Ericsson’s SEPs and brought suit against Ericsson in April 2017, alleging that Ericsson overcharges for its SEPs.


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Introduction

In a decision written by Judge Marsha S. Berzon, a three-judge panel of the U.S. Court of Appels for the Ninth Circuit affirmed a first-of-its-kind district court judgment relating to royalty rates for standard-essential patents (SEP). As part of the standard setting process, many standards organizations require members who hold patents necessary to implement