Fifth Circ affirms Ericsson’s FRAND win over HTC
The US Court of Appeals for the Fifth Circuit has ruled that Ericsson did not breach fair, reasonable and non-discriminatory (FRAND) obligations in its proposed licensing agreement with HTC over wireless standard-essential patents (SEPs).
Writing for the three-judge panel, US circuit judge Jennifer Walker Elrod claimed that HTC failed to demonstrate why this particular licence agreement was different from agreements Ericsson had struck with companies like Apple, Samsung and Huawei.
The ruling, published Monday, August 31, saw the circuit judges unanimously affirm a US District Court for the Eastern District of Texas characterisation of Ericsson’s offer as FRAND.
However, the court did find that the district court erred by not instructing the jury to isolate the value of Ericsson’s SEPs from the value of standardisation in their analysis. It also found that the court diverged from the standard procedure by not accepting either Ericsson or HTC’s written jury instructions.
HTC had argued that, by not accepting its jury instructions, the court had committed a reversible error. However, Elrod claimed that the absence of these apportionment instructions did not “substantially impair” HTCs ability to present its case.
Case history
HTC sued Ericsson after negotiations to license 4G wireless patents collapsed. Ericsson proposed a $2.50 rate per 4G device in renewal discussions in 2016. HTC did not accept the offer, instead proposing a rate of $0.10 per device in April 2017, based on the smallest salable patent-practicing unit rather than the net sales price of the entire end-user device.
HTC concluded that the relevant unit was the baseband processor, the hardware component of a cellular device that allows it to connect to cellular networks.
Ericsson considered the offer to be “so far off the norm” that it “chilled” the negotiations, according to the complaint.
A few days after the meeting, HTC filed a complaint with the Texas court, alleging that Ericsson had breached its commitment to provide a licence on FRAND terms.
Whilst the suit was pending, Ericsson proposed a new offer in which HTC would pay 1% of each 4G device sold, subject to a $1 floor and $4 cap. HTC did not accept this offer either, instead filing an amended complaint seeking declaratory relief that Ericsson had breached contractual obligations and failed to negotiate in good faith.
Ericsson then filed a counterclaim to declare that its offers were FRAND and alleged that HTC failed to negotiate in good faith.
The Texas court jury verdict ruled in February 2019 that HTC did not prove that Ericsson breached FRAND duties, but found that both parties breached their obligations to negotiate in good faith.
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