TCL Communication Technology Holdings Ltc. v. Telefonaktiebolaget LM Ericsson, No. 18-1363 (Fed. Cir. 2019)Annotate this Case
Ericsson owns patents essential to practicing standards (SEPs) that enable mobile devices from different manufacturers and different networks to communicate with each other using the same communication protocol. Ericsson is a member of the European Telecommunications Standards Institute (ETSI), the organization responsible for developing 2G, 3G, and 4G standards. ETSI’s acceptance of a member’s patent as "SEP" forms a contract between ETSI and its members. SEP owners wield significant power over implementers during licensing negotiations, so the ETSI contract imposes an obligation to license (FRAND obligation). Ericsson and TCL have been negotiating licensing terms for over a decade. There was litigation. The parties agreed to binding court adjudication of terms for a worldwide portfolio license. The district court imposed a prospective FRAND royalty rate for practicing each standard, and a “release payment” computed based on a closely related, retrospective FRAND rate for “TCL’s past unlicensed sales.” The court rejected both parties’ proposed methodologies and employed its own modified version of TCL’s proposed “top-down” approach in combination with comparable license evidence to compute both the prospective and retrospective FRAND rates. The Federal Circuit vacated in part. Ericsson had a Seventh Amendment right to a jury trial on the adjudication of the “release payment” term; the release payment is in substance compensatory relief for TCL’s past patent infringing activity.