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6 December 2019PatentsRory O'Neill

Fed Circuit overturns TCL v Ericsson SEP ruling

A long-running dispute over standard-essential patent (SEP) licences will be sent back to a jury after the US Court of Appeals for the Federal Circuit overturned a district court injunction in Ericsson v  TCL.

In its ruling, issued yesterday, December 5 the Federal Circuit ruled that a “release payment” included in the injunction was a matter for a jury rather than the bench.

Chinese electronics company TCL sued Ericsson at the US District Court for the District of Central California in 2014, alleging that the Swedish company failed to offer SEP licences on fair, reasonable, and non-discriminatory (FRAND) terms.

The SEPs concerned 2G, 3G, and 4G technology which is essential to smartphones. Ericsson responded that its licensing offers were consistent with FRAND obligations, and said it was owed damages for TCL’s infringement of the SEPs.

The district court ultimately ruled that Ericsson had failed to offer the licences on FRAND terms, favouring a modified version of the “top-down” method of calculating FRAND royalties proposed by TCL.

This method, the court said, barred the possibility of SEP owners such as Ericsson receiving excessive royalty payments because it was determined as a slice of the overall value of the patents.

The court issued an injunction setting terms for a FRAND licence, which included a “release payment” compensating Ericsson for TCL’s use of the patented technology

Ericsson challenged the injunction on the grounds that the release payment effectively constituted damages for infringement of its SEPs, and that it therefore should have been set by a jury rather than a ruling from the bench.

The Federal Circuit agreed, noting that it was a “well-settled principle that jury trials are available for damages for patent infringement”.

The court rejected TCL’s argument that the release payment was analogous to a contract and designed to “retroactively” impose the terms of the FRAND licence set by the district court.

“[TCL] improperly focuses on the form of the relief, rather than its underlying substance,” the Federal Circuit wrote.

The Federal Circuit also rejected TCL’s argument that Ericsson waived its right to a jury trial by agreeing that the release payment would be “determined by the Court” at the conclusion of the litigation.

Courts should “indulge every reasonable presumption against waiver [of a jury trial],” the Federal Circuit ruling said.

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More on this story

Patents
12 May 2020   In a significant 35 USC §101 ruling, the Federal Circuit has held that claims relating to an Ericsson patent were ineligible subject matter under the law, as Jeffrey D Smyth, Max Mauldin and Joseph Myles of Finnegan explain.
Patents
7 December 2020   The Department of Justice and the judiciary in the US have re-evaluated the potential implications of standard essential patents for patent owners, while international courts have upheld licensing regimes on the basis of FRAND terms. Robert Stoll of Faegre Drinker Biddle & Reath and former US Patent and Trademark Office commissioner for patents.
Patents
4 June 2020   An association of app developers wants the US Supreme Court to reverse a Federal Circuit ruling in favour of Ericsson over TCL.