TCL COMMUNICATION TECHNOLOGY HOLDINGS LIMITED, TCT MOBILE LIMITED, TCT MOBILE (US) INC., Plaintiffs-Appellees
TELEFONAKTIEBOLAGET LM ERICSSON, ERICSSON INC., Defendants-Appellants
TCL COMMUNICATION TECHNOLOGY HOLDINGS LIMITED, TCT MOBILE LIMITED, TCT MOBILE (US) INC., Defendants-Appellees
Appeals from the United States District Court for the Central
District of California in No. 8:14-cv-00341-JVS-DFM,
2:15-cv-02370-JVS-DFM, Judge James V. Selna.
Jeffrey A. Lamken, MoloLamken LLP, Washington, DC, argued for
defendants-appellants and plaintiffs-appellants. Also
represented by Emily Damrau, Rayiner Hashem, Michael Gregory
Pattillo, Jr.; Sara Margolis, New York, NY; Nicholas M.
Mathews, Theodore Stevenson, III, McKool Smith, PC, Dallas,
TX; John M. Whealan, Chevy Chase, MD.
Stephen S. Korniczky, Sheppard, Mullin, Richter & Hampton
LLP, San Diego, CA, argued for plaintiffs-appellees and
defendants-appellees. Also represented by Martin Bader,
Matthew Holder, Ericka Schulz, Karin Dougan Vogel.
S. Steuer, Wilson, Sonsini, Goodrich & Rosati, PC, Palo
Alto, CA, for amicus curiae InterDigital, Inc. Also
represented by Michael Brett Levin, Maura L. Rees.
D. Haynes, Alston & Bird LLP, Atlanta, GA, for amicus
curiae Nokia Technologies Oy.
Andrew Culbert, Perkins Coie, LLP, Seattle, WA, for amicus
curiae Uber Technologies, Inc. Also represented by Kevin
J. Routh, Orrick, Herrington & Sutcliffe LLP, Washington,
DC, for amicus curiae Panasonic Corporation. Also represented
by Benjamin Paul Chagnon, Hannah Garden-Monheit, John Arpio
J. Ayers, Law Office of Peter J. Ayers, Austin, TX, for amici
curiae John Jarosz, Jeffrey H. Kinrich, Michael Chapman,
Michael Wagner, Edward A. Gold, John Bone, David Haas, Scott
Michael A. Bittner, Winston & Strawn LLP, Dallas, TX, for
amicus curiae Peter Georg Picht.
Kevin Baron, Holland & Knight, LLP, Boston, MA, for
amicus curiae Kelce Wilson.
R. Barney, Finnegan, Washington, DC, for amici curiae Toyota
Motor Corporation, Honda Motor Co., Ltd., Nissan Motor Co.
Ltd., Denso Corporation, Hyundai Motor Company. Also
represented by David Brian Kacedon, Joseph Preston Long.
Hardy, Williams & Connolly LLP, Washington, DC, for amici
curiae High Tech Inventors Alliance, Alliance of Automobile
Manufacturers, Inc., Google LLC, Hewlett Packard Enterprise
Company, HP Inc. Also represented by Samuel Bryant Davidoff.
H. Herrington, Cleary, Gottlieb, Steen & Hamilton LLP,
New York, NY, for amicus curiae Fair Standards Alliance ASBL.
Also represented by Alexandra Theobald; Daniel P. Culley,
Jennifer H. Doan, Haltom & Doan, Texarkana, TX, for amici
curiae HTC Corporation, HTC America, Inc.
Newman, Chen, and Hughes, Circuit Judges.
appeal arises from a March 9, 2018 decision and order issued
by the United States District Court for the Central District
of California (the court) imposing "fair, reasonable and
non-discriminatory" (FRAND) rates in a binding worldwide
license on Appellants (Ericsson) and Appellees (TCL) for
Ericsson's portfolio of standard-essential patents (SEPs)
incorporated into 2G, 3G, and 4G mobile communications
court-ordered license set forth two terms relevant on appeal:
(1) a prospective FRAND royalty rate for practicing each
standard, and (2) a "release payment" computed
based on a closely related, retrospective FRAND rate for
"TCL's past unlicensed sales." To determine
these rates, the court conducted a ten-day bench trial, where
the two parties proposed different FRAND rates based on
different methodologies. Rejecting both parties' proposed
methodologies as flawed, the court 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.
threshold issue on appeal is whether Ericsson had a Seventh
Amendment right to a jury trial on the adjudication of the
"release payment" term. This inquiry turns on
whether the relief sought by the release payment is either
legal or equitable in nature. Because we conclude that the
release payment is in substance compensatory relief
for TCL's past patent infringing activity, we hold that
Ericsson was entitled to a jury trial on the calculation of
the release payment amount, and that the district court
deprived Ericsson of that right by determining that legal
relief in a bench trial. For the reasons explained below, we
vacate-in-part, reverse-in-part, and remand for further
proceedings consistent with this opinion.
promote interoperability of different devices through the use
of the same protocol. Patents declared to be essential to
practicing a standard are often referred to as SEPs. This
case involves a portfolio of SEPs owned by Ericsson
incorporated into 2G, 3G, and 4G standards that enable mobile
devices from different manufacturers and different networks
to communicate with each other using the same communication
and the FRAND Obligation
is a member of the European Telecommunications Standards
Institute (ETSI), which is the international standard-setting
organization responsible for developing 2G, 3G, and 4G
standards. For a patent to become essential to an ETSI
standard, ETSI members first submit declarations identifying
which of their patents or applications may become essential
to the standard. ETSI's acceptance of a member's
patent as an SEP forms a contract between ETSI and its
members. Together, the 2G, 3G, and 4G standards incorporate
the technologies claimed by thousands of SEPs, including over
one hundred owned by Ericsson.
interoperability requires the practice of these standards,
owners of such SEPs wield significant power over implementers
during licensing negotiations. To offset this power imbalance
and promote interoperability, the contract imposes an
obligation to license, referred to here as the "FRAND
obligation," on ETSI members. J.A. 35. As defined by
§ 6.1 of the ETSI Intellectual Property Rights Policy,
this obligation requires members to be "prepared to
grant irrevocable licenses" to implement their SEPs on
FRAND terms and conditions to implementers. J.A. 36. Because
this obligation is intended to benefit implementers of ETSI
standards, the implementers may assert their rights created
by the FRAND obligation as third-party beneficiaries.
manufactures mobile devices that implement these ETSI
standards so that they may interoperate in the mobile
communications environment. As a member of ETSI, Ericsson is
bound by its contractual FRAND obligation to ETSI to be
prepared to offer TCL FRAND-complaint terms to license its
parties have been negotiating licensing terms for over a
decade. In 2007, TCL and Ericsson entered into 2G licenses
with seven-year terms. TCL did not sell a meaningful volume
of 3G phones until 2011, when the two parties began to
negotiate a 3G license in earnest. In 2012, while the parties
were negotiating, Ericsson initiated a series of foreign
litigations against TCL for alleged infringement of
Ericsson's SEPs in six different jurisdictions (France,
United Kingdom, Brazil, Russia, Argentina, and Germany). In
2013, TCL began selling 4G phones, and the parties began
negotiating a license covering Ericsson's 4G SEPs. That
year, Ericsson offered 4G rates to TCL for the first time.
But TCL did not consider any of Ericsson's offers or
counteroffers to be on FRAND terms. In a 2014 meeting,
Ericsson made a license offer that TCL stated "look[ed]
promising." J.A. 31.
the parties reached agreement, TCL filed a declaratory
judgment action against Ericsson in the Central District of
California. This was filed right before TCL's 2G licenses
with Ericsson were set to expire. J.A. 32. When negotiations
finally failed, the parties agreed to engage in a binding
court adjudication of terms for a worldwide portfolio
license. J.A. 32. The adjudication of these terms is the
subject of this appeal.
case below is a consolidation of two district court actions.
The first action was initiated by TCL in March 2014, when it
filed suit against Ericsson in the Central District of
California (the California Action). The second action
followed in June 2014, when Ericsson filed suit against TCL
in the Eastern District of Texas (the Texas Action).
California Action, TCL sought declaratory judgment that
Ericsson had failed to offer a FRAND rate to TCL. J.A. 469.
In its prayer for relief, TCL requested that the court
"[d]etermine the FRAND rates that TCL is entitled
to," "[d]ecree that Ericsson has not offered
[FRAND] royalties to TCL," and "[d]ecree that TCL
is entitled to license from Ericsson any and all [SEPs] under
[FRAND] terms and conditions." J.A. 683. TCL also sought
damages for infringement of its own patents, as well as
various state law claims based on Ericsson's contractual
FRAND obligation with ETSI (e.g., breach of contract,
promissory estoppel, violation of California Unfair
Competition Law). J.A. 641.
Texas Action, Ericsson sought damages for infringement of two
individually-asserted SEPs, U.S. Patent No. 6, 301, 556 and
U.S. Patent No. 6, 473, 506, for which TCL filed
counterclaims of invalidity and non-infringement
(collectively, Ericsson's patent infringement claims and
TCL's related counterclaims of invalidity and
non-infringement). Ericsson further requested that the court
declare "that [it] complied with its FRAND commitments .
. . or, alternatively, adjudge and declare what steps would
be required for Ericsson to achieve such compliance."
Actions were consolidated in June 2015 when the Texas Action
was transferred to the Central District of California. The
same day, the court granted TCL's motion to enjoin
Ericsson "from further prosecuting any actions alleging
infringement of its 2G, 3G, and 4G patents until the FRAND
issues are resolved" in the Central District of
California. J.A. 32-33 (referring to J.A. 4687).
Ericsson's Proposed License Offers to TCL
court ordered the parties to provide contentions defining the
contents of a FRAND license. J.A. 131713. In response,
Ericsson proposed two alternative license offers,
"Option A" and "Option B," in its
contentions. J.A. 2718- 78; J.A. 4795-857. Eventually, the
court ruled that the FRAND determination would be made in
reference to Ericsson's Option A and B offers. J.A.
A proposed a lump-sum payment with percentage running
royalties. Under Option A for mobile phones, TCL would make
an annual payment of $30 million for its first $3 billion in
sales, with percentage running royalty rates for additional
sales. These running royalty rates were 0.8% of the net
selling price for phones with 2G GSM/GPRS, 1.1% for phones
with 2G EDGE, 1.5% for 3G devices, and 2.0% for 4G devices.
B proposed only running royalties with caps and floors. Under
Option B for mobile phones, TCL would pay percentage running
rates as follows: 0.8% of the net selling price of
2G/GSM/GPRS, 1.0% for 2G EDGE, ...