Ericsson, Inc. v. D-Link Sys., Inc.
| Citation | 113 U.S.P.Q.2d 1001,773 F.3d 1201 |
| Decision Date | 04 December 2014 |
| Docket Number | 2013–1632,2013–1633.,2013–1631,Nos. 2013–1625,s. 2013–1625 |
| Parties | ERICSSON, INC., Telefonaktiebolaget LM Ericsson, and Wi–Fi One, LLC, Plaintiffs–Appellees, v. D–LINK SYSTEMS, INC., Netgear, Inc., Acer, Inc., Acer America Corporation, and Gateway, Inc., Defendants–Appellants, and Dell, Inc., Defendant–Appellant, and Toshiba America Information Systems, Inc. and Toshiba Corporation, Defendants–Appellants, and Intel Corporation, Intervenor–Appellant, and Belkin International, Inc., Defendant. |
| Court | United States Courts of Appeals. United States Court of Appeals for the Federal Circuit |
Douglas A. Cawley, McKool Smith, P.C., of Dallas, TX, argued for plaintiffs-appellees Ericsson Inc., et al. With him on the brief were Theodore Stevenson, III and Warren Lipschitz, and John B. Campbell and Kathy H. Li, of Austin, TX. Of counsel on the brief was John M. Whealan, of Chevy Chase, MD.
William F. Lee, Wilmer Cutler Pickering Hale and Dorr LLP, of Boston, MA, argued for defendants-appellants and intervenor-appellant. With him on the brief for intervenor-appellant Intel Corporation were Joseph J. Mueller, Mark C. Fleming, and Lauren B. Fletcher, of Boston, MA; and James L. Quarles, III, of Washington, DC. Of counsel on the brief were Greg Arovas, Kirkland & Ellis LLP, of New York, New York, Adam R. Alper, of San Francisco, CA, and John C. O'Quinn, of Washington, DC. On the brief for defendants-appellants D–Link Systems, Inc., et al., were Robert A. Van Nest, Steven A. Hirsch, Eugene M. Paige and Matan Shacham, Keker & Van Nest LLP, of San Francisco, CA; Christine M. Morgan, Doyle B. Johnson, Jonah D. Mitchell, Scott D. Baker, Reed Smith LLP, of San Francisco, CA; and James C. Martin, of Pittsburgh, PA. On the brief for defendants-appellants Toshiba Corporation, et al., were John J. Feldhaus and Pavan K. Agarwal, Foley & Lardner LLP, of Washington, DC.
Michael J. Newton, Alston & Bird LLP, of Dallas, TX, argued for defendant-appellant, Dell, Inc. With him on the brief were Dwayne C. Norton and Shaun W. Hassett ; and Frank G. Smith, III, of Atlanta, GA.
Michael A. Lindsay, Dorsey & Whitney LLP, of Minneapolis, MN, for amicus curiae The Institute of Electrical and Electronics Engineers, Incorporated. Of counsel on the brief was Eileen M. Lach, IEEE, General Counsel and Chief Compliance Officer, of New York, N.Y.
Richard M. Brunell, for amicus curiae American Antitrust Institute, of Washington, DC.
Jeffrey Blumenfeld, Lowenstein Sandler LLP, of New York, NY, for amici curiae, Cisco Systems, Inc., et al. Of counsel on the brief was Marta Beckwith, Cisco Systems, Inc., San Jose, CA. On the brief for amicus curiae Hewlett–Packard Company was Barry K. Shelton, Bracewell & Giuliani, of Austin, TX.
T. Andrew Culbert, Microsoft Corporation, of Redmond, VA, for amicus curiae Microsoft Corporation. With him on the brief was David E. Killough.
Dan L. Bagatell, Perkins Coie LLP, of Phoenix, AZ, for amici Broadcom Corporation. With him on the brief was Amanda Tessar, of Denver, CO. On the brief for Marvell Semiconductor, Inc. was Donald M. Falk, Mayer Brown LLP, of Palo Alto, CA. On the brief for Media Tek Inc. was Steven C. Holtzman, Boies, Schiller & Flexner LLP, of Oakland, CA.
Richard S. Taffet, Bingham McCutchen LLP, of New York, N.Y., for amicus curiae Dolby Laboratories, Inc. On the brief was Patrick Strawbridge, of Boston, MA.
Roger G. Brooks, Cravath, Swaine & Moore LLP, of New York, NY, for amicus curiae Qualcomm Incorporated.
Daryl L. Joseffer, King & Spalding LLP, of Washington, DC, for amici curiae Nokia Corporation, et al. With him on the brief was Ethan P. Davis.
Before O'MALLEY, TARANTO, and HUGHES, Circuit Judges.
Ericsson, Inc. & Telefonaktiebolaget LM Ericsson (collectively, “Ericsson”) brought suit against D–Link Systems, Inc.; Netgear, Inc.; Acer, Inc.; Acer America Corp.; Gateway, Inc.; Dell, Inc.; Toshiba America Information Systems, Inc.; and Toshiba Corp., with Intel Corp. intervening (collectively, “D–Link”), in the United States District Court for the Eastern District of Texas, alleging infringement of, inter alia, certain claims from U.S. Patent Nos. 6,424,625 (“the '625 patent”) ; 6,466,568 (“the '568 patent”) ; and 6,772,215 (“the '215 patent”). All of the patents at issue generally relate to Wi–Fi technology employed by electronic devices to wirelessly access the Internet. Ericsson alleged that all of the patents at issue were essential to the Wi–Fi standard, which would mean that all Wi–Fi–capable devices infringe Ericsson's patents.
The case progressed to a jury trial, where the jury found that D–Link infringed the asserted claims of the three patents and assigned roughly $10 million in damages—approximately 15 cents per infringing device. After post-trial motions, the district court upheld the jury's infringement and validity findings and refused to grant a new trial based on an alleged violation of the “entire market value rule” (“EMVR”) and allegedly deficient jury instructions regarding the standard-setting context and Ericsson's “reasonable and non-discriminatory” licensing obligations derived from that context. For the reasons explained below, we affirm-in-part, reverse-in-part, vacate-in-part, and remand.
Interoperability is an essential requirement for many electronic devices. For example, if a user brings her laptop to a local coffee shop, she expects that her laptop will charge when she plugs it in and that she will be able to access the Internet when she connects to the coffee shop's wireless network. For the user to be able to charge her laptop, the plug must be in the correct shape and the laptop charger must be able to accept the voltage output of the outlet. For the user to be able to connect to the Internet, her laptop must know, inter alia, what frequency to search for the wireless signal, what messages to send to the network to set up a connection, and how to interpret the messages sent from the network. Though most users take for granted that their electronic devices will be able to charge and connect to the wireless Internet anywhere, interoperability does not happen automatically. Because of the multitude of devices, device designers, and manufacturers, there must be an established standard mode of operation to ensure compatibility among all of these different devices.
Standards development organizations (“SDOs”) publish standards, which are lists of technical requirements. Compliance with these technical requirements ensures interoperability among compliant devices. Of course, at least a critical mass of device developers must adopt the standard in order to ensure mass interoperability.1 Relevant to this case, the Institute of Electrical and Electronics Engineers, Inc. (“IEEE”) publishes the 802.11 standards, more commonly known as “Wi–Fi.” Br. of Amici Curiae Institute of Electrical and Electronics Engineers, Inc. (“IEEE Br.”) at 1–2. The 802.11 standard is the prevailing wireless internet standard and has already reached widespread adoption. A device is considered 802.11–compliant if it adheres to the IEEE's technological requirements stated in the 802.11 standard. Requiring all 802.11–compliant devices to operate in a certain way ensures that every compliant device can communicate with all other 802.11–compliant devices.2
For example, an 802.11–compliant laptop will be able to establish a connection with an 802.11–compliant router. The 802.11 standards also govern how subsequent data is passed between the laptop and the router once that connection is established. This includes, inter alia, data formatting, prioritization, error handling, and flow control.
Importantly for this case, data files are not sent between a router and a laptop in a single transmission. For example, if a laptop user wants to download a video, the router does not send the entire file in a single huge transmission. Instead, each data file is broken into “packets,” where each packet is sent in a different transmission. Small files may only require a single packet, whereas large files, e.g., video and sound, may require thousands of packets. The receiving device then reassembles the file out of the packets. The data from the file in the packet is called the “payload.” Because packets may be lost or arrive out of order, the 802.11 standard provides ways to handle these errors. For example, each packet has a “header” that is sent to the receiving device with the packet. The header contains, inter alia, a sequence number so the receiving device knows the order in which to reassemble the payload of the packets.
Creating some standards, like IEEE's 802.11 standard, is a complicated process that involves the collaboration and can involve cooperation of a number of interested parties. IEEE Br. 4–12. Due to the collaborative nature of this process, the chosen standard may include technology developed by a number of different parties. Sometimes that technology is covered by patents. Because the standard requires that devices utilize specific technology, compliant devices necessarily infringe certain claims in patents that cover technology incorporated into the standard. These patents are called “standard essential patents” (“SEPs”). IEEE Br. 13–14.
SEPs pose two potential problems that could inhibit widespread adoption of the standard: patent hold-up and royalty stacking. 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. To help alleviate these potential concerns, SDOs often seek 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 ...
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