In an amicus brief filed in the Federal Circuit Court of Appeals, the AAI urged the patent court to adopt jury instructions that would prevent juries from awarding excessive royalties in patent infringement cases involving “standard-essential patents” (SEPs) that the patent holder has committed to license on “reasonable and non-discriminatory” (RAND) terms.
The brief explains that the proper determination of RAND royalties is critical to ensure that RAND commitments serve their purpose as safeguards against the exercise of monopoly power conferred by standard-setting organizations (SSOs) on a patent holder by virtue of the inclusion of patented technology in a popular standard.
AAI argues that it is not enough that courts deny SEP holders an injunction against makers of standards-compliant products. The legal test for RAND damages can also lead to excessive royalties, especially because standards often include hundreds or thousands of essential patents. Excessive royalties undermine the standard-setting process, harm competition and consumers, and impair innovation, AAI said.
The brief argues that the traditional test for determining royalties in patent infringement cases—the so-called Georgia-Pacific factors—are inadequate for determining RAND royalties and must be significantly modified to take into account a patent holder’s RAND commitment.
Specifically, the brief argues that juries must be instructed that a SEP holder is to be compensated for the value of its technology in relation to the alternatives available to the SSO at the time the technology was included in the standard—and not the value attributable to the incorporation of the technology into the standard itself—subject to a “royalty stacking” constraint, i.e., the royalty may not exceed an appropriate share of a total royalty burden of implementing the standard that is calculated so that implementation of the standard is not undermined.
The brief was written by AAI General Counsel Richard Brunell.