No. 19-
`
`IN THE
`Supreme Court of the United States
`
`
`TCL COMMUNICATION TECHNOLOGY HOLDINGS LIMITED;
`TCT MOBILE LIMITED; TCT MOBILE (US) INC.,
`Petitioners,
`
`v.
`
`ERICSSON, INC.; TELEFONAKTIEBOLAGET LM
`ERICSSON,
`
`Respondents.
`
`
`ON PETITION FOR A WRIT OF CERTIORARI TO THE
`UNITED STATES COURT OF APPEALS
`FOR THE FEDERAL CIRCUIT
`
`PETITION FOR A WRIT OF CERTIORARI
`
`
`STEPHEN S. KORNICZKY
`MARTIN R. BADER
`MATTHEW W. HOLDER
`SHEPPARD MULLIN RICHTER
` & HAMPTON LLP
`12275 El Camino Real
`Suite 200
`San Diego, CA 92130
`(858) 720-8900
`
`
`
`SETH P. WAXMAN
` Counsel of Record
`THOMAS G. SAUNDERS
`SAMUEL M. STRONGIN
`JANE E. KESSNER*
`WILMER CUTLER PICKERING
` HALE AND DORR LLP
`1875 Pennsylvania Ave. NW
`Washington, DC 20006
`(202) 663-6000
`seth.waxman@wilmerhale.com
`
`* Admitted to practice only in
`Maryland. Supervised by
`members of the District of
`Columbia bar.
`
`ADDITIONAL COUNSEL LISTED ON INSIDE COVER
`
`
`
`
`
`
`IN THE
`Supreme Court of the United States
`
`
`TCL COMMUNICATION TECHNOLOGY HOLDINGS LIMITED;
`TCT MOBILE LIMITED; TCT MOBILE (US) INC.,
`Petitioners,
`
`v.
`
`ERICSSON, INC.; TELEFONAKTIEBOLAGET LM
`ERICSSON,
`
`Respondents.
`
`
`ON PETITION FOR A WRIT OF CERTIORARI TO THE
`UNITED STATES COURT OF APPEALS
`FOR THE FEDERAL CIRCUIT
`
`PETITION FOR A WRIT OF CERTIORARI
`
`
`STEPHEN S. KORNICZKY
`MARTIN R. BADER
`MATTHEW W. HOLDER
`SHEPPARD MULLIN RICHTER
` & HAMPTON LLP
`12275 El Camino Real
`Suite 200
`San Diego, CA 92130
`(858) 720-8900
`
`
`
`SETH P. WAXMAN
` Counsel of Record
`THOMAS G. SAUNDERS
`SAMUEL M. STRONGIN
`JANE E. KESSNER*
`WILMER CUTLER PICKERING
` HALE AND DORR LLP
`1875 Pennsylvania Ave. NW
`Washington, DC 20006
`(202) 663-6000
`seth.waxman@wilmerhale.com
`
`* Admitted to practice only in
`Maryland. Supervised by
`members of the District of
`Columbia bar.
`
`ADDITIONAL COUNSEL LISTED ON INSIDE COVER
`
`
`
`
`
`
`KARIN DOUGAN VOGEL
`SHEPPARD MULLIN RICHTER
` & HAMPTON LLP
`501 West Broadway
`19th Floor
`San Diego, CA 92101
`(619) 338-6500
`
`
`
`
`
`
`
`
`QUESTION PRESENTED
`
`Technical standards created by standard-setting
`organizations—such as the 2G, 3G, and 4G wireless
`communication standards—are ubiquitous in the mod-
`ern economy and enable the interoperability of prod-
`ucts made by different manufacturers. To facilitate the
`implementation of standards and prevent abusive prac-
`tices, most standard-setting organizations require com-
`panies that believe their patents are essential to prac-
`ticing a standard to make binding commitments to li-
`cense their patents on fair, reasonable, and non-
`discriminatory (FRAND) terms. When the holder of a
`standard-essential patent refuses to honor that com-
`mitment, prospective licensees may seek a ruling that
`the FRAND commitment has been breached and an
`injunction ordering specific performance (i.e., forming a
`new license with FRAND terms and conditions).
`In the decision on review, the Federal Circuit held
`that the patent owner accused of breaching its FRAND
`commitment had a Seventh Amendment right to have a
`jury set the royalty rate in the injunction requiring it to
`license its worldwide portfolio of patents on FRAND
`terms, simply because the injunction included a back-
`ward-looking royalty payment proposed by the patent
`owner as part of the consideration that the licensee was
`required to pay to receive specific performance.
`The question presented is:
`Whether a patent owner required to license its
`standard-essential patents on fair, reasonable, and non-
`discriminatory terms has a Seventh Amendment right
`to a jury trial in a proceeding seeking the equitable re-
`lief of specific performance.
`
`
`
`(i)
`
`
`
`
`
`PARTIES TO THE PROCEEDINGS
`
`Petitioners TCL Communication Technology Hold-
`ings Limited, TCT Mobile Limited, and TCT Mobile
`(US), Inc. (collectively “TCL”) were the plaintiffs-
`appellees in the Federal Circuit.
`Respondents Ericsson, Inc. and Telefonaktiebo-
`laget LM Ericsson (collectively “Ericsson”) were the
`defendants-appellants in the Federal Circuit.
`
`
`CORPORATE DISCLOSURE STATEMENT
`
`Petitioners TCT Mobile Limited and TCT Mobile
`(US), Inc. are wholly-owned by Petitioner TCL Com-
`munication Technology Holdings, Limited. No publicly
`held corporation owns 10% or more of any Petitioner’s
`member interest.
`
`
`
`
`
`(ii)
`
`
`
`
`
`TABLE OF CONTENTS
`
`Page
`QUESTION PRESENTED ............................................... i
`PARTIES TO THE PROCEEDINGS ............................ ii
`CORPORATE DISCLOSURE STATEMENT ............. ii
`TABLE OF AUTHORITIES .......................................... vi
`INTRODUCTION .............................................................. 1
`OPINIONS BELOW .......................................................... 4
`JURISDICTION ................................................................. 4
`CONSTITUTIONAL PROVISION INVOLVED ........ 4
`STATEMENT ..................................................................... 5
`A. Technical Standards And FRAND
`Obligations ............................................................. 5
`B. Negotiations Between TCL And
`Ericsson .................................................................. 7
`C. District Court Proceedings .................................. 8
`D. Federal Circuit Proceedings And
`Remand ................................................................. 11
`REASONS FOR GRANTING THE PETITION........ 14
`I. THE DECISION BELOW ALLOWS JURIES TO
`DECIDE
`EQUITABLE
`QUESTIONS,
`IMPROPERLY ALTERING THE BALANCE OF
`RESPONSIBILITIES BETWEEN JUDGE AND
`JURY ............................................................................. 15
`
`
`
`(iii)
`
`
`
`iv
`
`TABLE OF CONTENTS—Continued
`
`Page
`
`A. Royalties Imposed By Injunction After
`A Patent Owner Violates Its FRAND
`Obligation Are Consideration For
`Specific Performance, Not Patent
`Infringement Damages ...................................... 16
`1. Consideration paid by a party
`seeking specific performance is not
`a form of legal damages ............................... 16
`2. The release payment was not a
`form
`of
`patent
`infringement
`damages ......................................................... 18
`B. There Is No Seventh Amendment
`Right To A Jury Trial On Issues Of
`Specific Performance .......................................... 21
`II. THE FEDERAL CIRCUIT’S RULING
`PRESENTS A QUESTION OF GLOBAL
`IMPORTANCE ............................................................... 24
`A. Unless Reversed, The Federal
`Circuit’s Decision Will Bind Courts
`Across The Nation .............................................. 25
`B. The Federal Circuit’s Decision Creates
`Opportunities For Gamesmanship ................... 25
`C. The
`Federal
`Circuit’s
`Ruling
`Threatens The Important Interests
`Served By FRAND Obligations ....................... 27
`III. THIS CASE IS AN IDEAL VEHICLE FOR
`ADDRESSING THE QUESTION PRESENTED ............. 30
`A. This Case Is An Ideal Vehicle ........................... 30
`
`
`
`
`
`
`v
`
`TABLE OF CONTENTS—Continued
`
`Page
`
`B. This Court’s Prompt Review
`Is
`Necessary To Facilitate Predictability
`On FRAND Compliance Claims ....................... 31
`C. Ericsson’s
`Alternative
`Seventh
`Amendment Arguments Are Likewise
`Incorrect ............................................................... 32
`CONCLUSION ................................................................. 34
`APPENDIX A: Opinion of the United States
`Court of Appeals for the Federal Circuit,
`dated December 5, 2019............................................. 1a
`APPENDIX B: Amended Final Judgment and
`Injunction of the United States District
`Court for the Central District of California,
`dated March 9, 2018 ................................................. 29a
`
`
`
`
`
`
`
`
`vi
`
`TABLE OF AUTHORITIES
`
`CASES
`
`Page(s)
`
`AstraZeneca AB v. Apotex Corp., 782 F.3d
`1324 (Fed. Cir. 2015) .................................................. 19
`Atlas Roofing Co., v. Occupational Safety &
`Health Review Commission, 430 U.S. 442
`(1977) ............................................................................ 21
`Beacon Theatres, Inc. v. Westover, 359 U.S. 500
`(1959) ...................................................................... 23, 24
`Bowen v. Massachusetts, 487 U.S. 879 (1988) ............... 22
`Dairy Queen, Inc. v. Wood, 369 U.S. 469 (1962) ..... 23, 24
`Estate of Meller v. Adolf Meller Co., 554 A.2d
`648 (R.I. 1989) ............................................................. 17
`Great-West Life & Annuity Insurance Co. v.
`Knudson, 534 U.S. 204 (2002) ................................... 12
`In re Lockwood, 50 F.3d 966 (Fed. Cir. 1995) ................ 33
`Jacobs v. United States, 239 F.2d 459 (4th Cir.
`1956) ............................................................................. 17
`Kelsey v. Crowther, 162 U.S. 404 (1896) ......................... 17
`Klein v. Shell Oil Co., 386 F.2d 659 (8th Cir.
`1967 ......................................................................... 22, 23
`v.
`Lazare Kaplan
`International,
`Inc.
`Photoscribe Technologies, Inc., 714 F.3d
`1289 (Fed. Cir. 2013) .................................................. 19
`Littlefield v. Brown, 394 A.2d 794 (Me. 1978) ............... 17
`
`
`
`
`
`
`vii
`
`TABLE OF AUTHORITIES—Continued
`
`Page(s)
`
`Marseilles Hydro Power, LLC v. Marseilles
`Land & Water Co., 299 F.3d 643 (7th Cir.
`2002) ............................................................................. 22
`Microsoft Corp. v. AT&T Corp., 550 U.S. 437
`(2007) ............................................................................ 20
`Owens-Illinois, Inc. v. Lake Shore Land Co.,
`Inc., 610 F.2d 1185 (3d Cir. 1979) ............................. 22
`Phlo Corp. v. Stevens, 62 F. App’x 377 (2d Cir.
`2003) ............................................................................. 22
`Tull v. United States, 481 U.S. 412 (1987) ............... 15, 22
`Willard v. Tayloe, 75 U.S. 557 (1869) ....................... 17, 18
`Wise v. Grand Avenue Railway Co., 33 F. 277
`(C.C.W.D. Mo. 1888) ................................................... 33
`Zenith Electronics, LLC, v. Sceptre, Inc., 2015
`WL 12830689 (C.D. Cal. Feb. 5, 2015) ..................... 30
`
`CONSTITUTIONAL AND STATUTORY
`PROVISIONS
`U.S. Const. amend. VII ................................................ 4, 15
`28 U.S.C.
`§ 1254 .............................................................................. 4
`§ 1295 ............................................................................ 25
`35 U.S.C.
`§ 286 ........................................................................ 13, 20
`§ 287 ........................................................................ 13, 20
`Act of July 8, 1870, 16 Stat. 198 ....................................... 33
`
`
`
`
`
`
`viii
`
`TABLE OF AUTHORITIES—Continued
`
`Page(s)
`
`OTHER AUTHORITIES
`71 Am. Jur. 2d Specific Performance § 238
`(2020) ............................................................................ 16
`Bartlett, Jason R. & Jorge L. Contreras,
`Rationalizing FRAND Royalties: Can
`Interpleader Save the Internet of Things?,
`36 Rev. Litig. 285 (2017) ............................................ 28
`Beauchamp, Christopher, The First Patent
`Litigation Explosion, 125 Yale L.J. 848
`(2016) ............................................................................ 33
`Contreras, Jorge L., From Private Ordering to
`Public Law: The Legal Frameworks
`Governing Standards-Essential Patents,
`30 Harv. J.L. & Tech. 211 (2017) ................................ 6
`Davis, Ryan, Fed. Circ.’s FRAND Decision
`Will Put Spotlight On Juries, Law360
`(Dec. 13, 2019), https://bit.ly/2zmLldx ............... 27, 31
`Graham, Scott, Ericsson Knocks Out Decision
`on FRAND Methodology, Law.com (Dec. 5,
`2019), https://bit.ly/2VFGOvB .................................. 31
`Lemley, Mark A., Intellectual Property Rights
`Standard-Setting Organizations,
`and
`90 Calif. L. Rev. 1889 (2002) ..................................... 28
`Lemley, Mark A., Why Do Juries Decide If
`Patents Are Valid?, 99 Va. L. Rev. 1673
`(2013) ............................................................................ 33
`
`
`
`
`
`
`ix
`
`TABLE OF AUTHORITIES—Continued
`
`Page(s)
`
`Lemley, Mark A. & Timothy Simcoe, How
`Essential
`Are
`Standard-Essential
`Patents?, 104 Cornell L. Rev. 607 (2019) ........ 5, 6, 28
`Leslie, Christopher R., Monopolization
`Through Patent Theft, 103 Geo. L.J. 47
`(2014) .............................................................................. 7
`Melamed, A. Douglas & Carl Shapiro, How
`Antitrust Law Can Make FRAND
`Commitments More Effective, 127 Yale
`L.J. 2110 (2018) ............................................. 5, 6, 28, 29
`Moore, Kimberly A., Jury Demands: Who’s
`Asking?, 17 Berkeley Tech. L.J. 847 (2002) ........... 25
`PricewaterhouseCoopers,
`2018
`Patent
`Study
`(May
`2018),
`Litigation
`https://pwc.to/3bP4G5L ............................................. 29
`Quinn, Gene, Wins Ericsson, But CAFC
`Dodges Whether Offers Were FRAND,
`IPWatchdog
`(Dec.
`5,
`2019),
`https://bit.ly/2VLm3Pj............................................... 31
`Restatement (First) of Contracts § 359 (Am.
`Law Inst. 1932) ........................................................... 17
`Restatement (Second) of Contracts § 345 (Am.
`Law Inst. 1981) ........................................................... 16
`Smelcer, Susan N., Anticompetitive Use of
`Administrative Trials in Bargaining Over
`Patent Rights, 91 N.Y.U. L. Rev. 1719
`(2016) .............................................................................. 7
`
`
`
`
`
`
`x
`
`TABLE OF AUTHORITIES—Continued
`
`Page(s)
`
`Spulber, Daniel F., Standard Setting
`Organisations and Standard Essential
`Patents: Voting and Markets, Econ. J.
`(2018), https://bit.ly/2Y6AaAi ..................................... 5
`United States Patent & Trademark Office,
`National
`Institutes of Standards &
`Technology, and U.S. Department of
`Justice
`(Antitrust Division), Policy
`Statement on Remedies for Standards-
`Essential Patents Subject to Voluntary
`F/RAND Commitments,
`https://bit.ly/
`3bOCgZC (Dec. 19, 2019) .......................................... 28
`9 Wright, Charles Alan & Arthur R. Miller,
`Federal Practice & Procedure § 2309
`(3d ed. 2020) ................................................................. 22
`
`
`
`
`
`
`
`
`
`
`INTRODUCTION
`The Federal Circuit’s decision in this case rests on
`a fundamental error of constitutional law, binding on
`courts in patent cases across the nation, that risks sig-
`nificant harm to the economy. The Federal Circuit mis-
`interpreted the Seventh Amendment to hold that Re-
`spondent Ericsson had a right to a jury trial on a claim
`by Petitioner TCL seeking specific performance in eq-
`uity of Ericsson’s commitment to license its worldwide
`portfolio of standard-essential patents on fair, reasona-
`ble, and non-discriminatory (FRAND) terms. Specifi-
`cally, it held that because the injunction setting the
`terms of the parties’ new license included a backward-
`looking royalty as part of TCL’s consideration for Er-
`icsson’s specific performance, the district court was re-
`quired to have a jury calculate the royalty amount.
`This erroneous interpretation of the Seventh Amend-
`ment upsets the traditional division of responsibility
`between judges and juries, and injects substantial un-
`certainty into the enforcement of FRAND licensing
`commitments. Given the Federal Circuit’s misinterpre-
`tation of the Constitution, its nationwide jurisdiction
`over patent cases, and the importance of the question
`presented, this Court should grant the petition and re-
`verse.
`TCL manufactures mobile devices that use the 2G,
`3G, and 4G wireless standards. Ericsson holds patents
`in multiple countries that it alleges are essential to the
`operation of those standards, and that it has committed
`to license on FRAND terms. After licensing negotia-
`tions with Ericsson failed, TCL sued to enforce Erics-
`son’s FRAND commitment and obtain a license on
`FRAND terms. Ericsson responded by suing TCL,
`seeking damages for patent infringement and a declara-
`
`
`
`
`
`2
`
`tion that it had complied with its FRAND commitment.
`Ericsson later agreed to stay its infringement claims
`and TCL’s challenges to its patents so the case could
`proceed to trial on the parties’ respective claims re-
`garding whether Ericsson had complied with
`its
`FRAND commitments. Because only claims for equi-
`table and declaratory relief remained by the time of tri-
`al, the district court held a bench trial and issued a
`lengthy opinion concluding that the terms offered by
`Ericsson were not
`fair, reasonable, and non-
`discriminatory. The court then issued an injunction
`setting the terms of a new worldwide patent license as
`a matter of specific performance. That new license re-
`quired TCL to pay both an ongoing royalty for future,
`worldwide use of Ericsson’s entire portfolio of stand-
`ard-essential patents, and also a backward-looking roy-
`alty, referred to as a “release payment,” for the same
`scope of past use.
`On appeal, the Federal Circuit vacated, reasoning
`that the Seventh Amendment guaranteed Ericsson the
`right to a jury trial because the backward-looking roy-
`alty payment in the injunction was analogous to dam-
`ages for patent infringement, even though the parties
`did not litigate any patent infringement claim. That
`conclusion upends the traditional distinction between
`equity and law, and conflicts with prior decisions of this
`Court and other courts. The backward-looking royalty
`arose only as a term of a worldwide license created
`through an injunction entered in equity. Its operation
`in the new license simply carried out the long-standing
`principle that a party seeking specific performance
`must pay the consideration owed to the opposing party
`for that performance. It was not a form of legal dam-
`ages, as Ericsson had no entitlement at law to payment
`without both establishing the infringement of its pa-
`
`
`
`
`
`3
`
`tents and providing TCL an opportunity to challenge
`the validity of those patents. Nor could Ericsson have
`asked a U.S. jury to award damages for alleged in-
`fringement of foreign patents, or for products neither
`made nor sold in the U.S. Nor could it have sought
`damages going back to TCL’s first alleged use of its pa-
`tents without regard to applicable statutes of limita-
`tions and notice requirements. Yet the release pay-
`ment awarded by the district court gave Ericsson all of
`these things. It was a creation of equity on which there
`is no historical right to a jury trial.
`The Federal Circuit’s contrary decision not only
`misinterprets the Constitution but also threatens to
`fundamentally reshape proceedings to enforce FRAND
`commitments. Ericsson introduced the idea of a back-
`ward-looking royalty by including it in the fully-
`integrated patent license offered in this case. Taking a
`page from Ericsson’s playbook, other patent owners
`who have refused to offer licenses on FRAND terms
`will similarly insist that their licenses should include
`such payments, and therefore that a jury rather than a
`judge should determine the FRAND royalty rate when
`the patent owner is sued for specific performance of its
`FRAND commitment. That will inflate the cost of
`practicing standards and replace reasoned judicial deci-
`sions with black box jury verdicts that provide little
`guidance. The resulting cloud of uncertainty hanging
`over the process of licensing standard-essential patents
`will have profound economic consequences and under-
`mine the creation and implementation of the standards
`on which the modern economy depends.
`The Federal Circuit’s misinterpretation of the Con-
`stitution thus presents a question of worldwide im-
`portance that urgently requires review.
`
`
`
`
`
`
`4
`
`OPINIONS BELOW
`The opinion of the Federal Circuit (App. 1a-27a) is
`reported at 943 F.3d 1360. The district court’s final
`pretrial conference order overruling Ericsson’s objec-
`tion to a bench trial is unpublished, but can be found at
`Dkt. 1448, No. 8:14-cv-00341, TCL Communication
`Technology Holdings, Ltd. v. Telefonaktiebolaget LM
`Ericsson, et al. (C.D. Cal. Jan. 30, 2017) (“D. Ct. Dkt.”).
`The district court’s Amended Final Judgment and In-
`junction (App. 29a-58a) is unpublished, but can be found
`at D. Ct. Dkt. 1940 (Mar. 9, 2018) and C.A.J.A. 1-25.
`
`JURISDICTION
`The Federal Circuit entered judgment on Decem-
`ber 5, 2019. On February 24, 2020, the Chief Justice
`extended the time for filing this petition through April
`3. On March 19, this Court issued an order extending
`the deadline for filing a petition for certiorari for all
`pending and future cases before the Court to 150 days
`from the relevant lower court judgment. That order
`extended TCL’s time to file this petition until May 3.
`This Court has jurisdiction under 28 U.S.C. § 1254(1).
`
`CONSTITUTIONAL PROVISION INVOLVED
`The Seventh Amendment to the U.S. Constitution
`provides that:
`In Suits at common law, where the value in contro-
`versy shall exceed twenty dollars, the right of trial
`by jury shall be preserved, and no fact tried by a
`jury, shall be otherwise re-examined in any Court
`of the United States, than according to the rules of
`the common law.
`
`
`
`
`
`
`5
`
`STATEMENT
`A. Technical Standards And FRAND Obligations
`Technical standards are ubiquitous and critical to
`the functioning of the modern economy. Standards
`specify technical requirements for the design, configu-
`ration, or operation of products or processes. By doing
`so, standards help promote the interoperability of
`equipment made by different manufacturers. Lemley
`& Simcoe, How Essential Are Standard-Essential Pa-
`tents?, 104 Cornell L. Rev. 607, 609 (2019). Examples of
`standards include the mobile broadband standards used
`by cell phones (e.g., 2G, 3G, 4G, and 5G); standards for
`wireless local area networks (e.g., 802.11 Wi-Fi); stand-
`ards for payment systems (e.g., credit cards with EMV
`chips); standards for the automotive industry (e.g., pro-
`tocols for testing airbags); standards for connecting
`computers and peripheral equipment (e.g., USB);
`standards for file formats (e.g., pdf); standards for read-
`ing optical discs (e.g., CD-ROM); standards for hard-
`ware (e.g., spacing of threads on screws); and so on.
`These are only a tiny fraction of the hundreds of thou-
`sands of standards that apply to consumer goods, com-
`munications technology, industrial equipment, trans-
`portation services, and countless other industries.
`Spulber, Standard Setting Organisations and Stand-
`ard Essential Patents: Voting and Markets 2, Econ. J.
`(2018), https://bit.ly/2Y6AaAi.
`More than a thousand different standard-setting
`organizations promulgate technical standards. See
`Melamed & Shapiro, How Antitrust Law Can Make
`FRAND Commitments More Effective, 127 Yale L.J.
`2110, 2112 (2018); Spulber, Standard Setting, supra, at
`2.
` Standard-setting organizations are often non-
`governmental entities that bring together members of
`
`
`
`
`
`6
`
`an affected industry and other experts to define the
`technical specifications for a standard. Contreras,
`From Private Ordering to Public Law: The Legal
`Frameworks Governing Standards-Essential Patents,
`30 Harv. J.L. & Tech. 211, 215 (2017).
`Many standard-setting organizations adopt policies
`regarding standard-essential patents that must be
`practiced to use the standard. These policies are de-
`signed to enable patent “holders to obtain reasonable
`royalties for licensing their patents, while prohibiting
`them from charging excessive royalties after other in-
`dustry participants have committed to the standard.”
`Melamed & Shapiro, 127 Yale L.J. at 2113. Without
`such constraints, the holders of standard-essential pa-
`tents would be able to extract disproportionate royal-
`ties that do not reflect the actual value of the patented
`invention compared to other technologies that might
`have been chosen for the standard, but rather reflect
`the fact that “implementers are locked into the stand-
`ard” and “have no choice but to use the patented tech-
`nology.” Id. Patent holders would also be able to dis-
`criminate among licensees in ways that could skew
`competition and undermine adoption of the standard.
`Standard-setting organizations typically address
`the risks of abusive licensing practices by requiring pa-
`tent owners who participate in the standard-setting
`process “to disclose patents that may become essential”
`and commit to license those patents on fair, reasonable,
`and non-discriminatory terms “to anyone who adopts
`the standards.” Lemley & Simcoe, 104 Cornell L. Rev.
`at 610. This obligation is commonly known as a
`“FRAND” requirement. See App. 4a. “Courts have
`viewed these agreements” between patent holders and
`standard-setting organizations “as enforceable con-
`
`
`
`
`
`
`7
`
`tracts,” with “potential licensees” who implement a
`standard as “third party beneficiaries.” Smelcer, Anti-
`competitive Use of Administrative Trials in Bargain-
`ing Over Patent Rights, 91 N.Y.U. L. Rev. 1719, 1746
`(2016). Implementers of a standard can thus file breach
`of contract actions to enforce a patent holder’s com-
`mitment to license its standard-essential patents on
`FRAND terms. See Leslie, Monopolization Through
`Patent Theft, 103 Geo. L.J. 47, 72 & n.140 (2014) (citing
`cases).
`
`B. Negotiations Between TCL And Ericsson
`Ericsson is a member of the European Technical
`Standards Institute (“ETSI”), “the international stand-
`ard-setting organization responsible for developing 2G,
`3G, and 4G standards.” App. 3a. Ericsson has identi-
`fied thousands of its patents as essential to 2G, 3G, and
`4G standards and committed to licensing those patents
`on FRAND terms.
`TCL is a manufacturer of mobile devices that uti-
`lize the 2G, 3G, and 4G interoperability standards.
`App. 4a. For over a decade, TCL and Ericsson have
`negotiated terms for TCL to license Ericsson’s stand-
`ard-essential patents. Id. They first negotiated seven-
`year licenses for the 2G standard in 2007. Id. In 2011,
`they began negotiating a license for Ericsson’s 3G pa-
`tents. Id. Two years later, once TCL started selling
`4G phones, the parties began negotiating a license for
`Ericsson’s 4G standard-essential patents. Id. TCL re-
`jected the offers Ericsson made during those negotia-
`tions as not compliant with Ericsson’s FRAND obliga-
`tion. App. 5a.
`
`
`
`
`
`
`8
`C. District Court Proceedings
`1. In March 2014, TCL filed suit in the Central
`District of California. App. 5a. TCL asserted claims
`for breach of contract and sought a declaration “that
`Ericsson had failed to offer a FRAND rate to TCL.”
`Id. It also asked the court to “‘[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 Erics-
`son any and all [standard-essential patents] under
`[FRAND] terms and conditions.’” Id. (alterations in
`original). TCL also initially sought damages based on
`Ericsson’s breach of its FRAND obligation. Id.
`In June 2014, Ericsson filed suit against TCL in the
`Eastern District of Texas. App. 5a. The suit “sought
`damages for infringement of two individually-asserted”
`patents that Ericsson alleged were standard essential.
`App. 6a. Ericsson also sought a declaration that it had
`satisfied its FRAND obligation or an order from the
`court “‘adjudg[ing] and declar[ing] what steps would be
`required for Ericsson to achieve such compliance.’” Id.
`TCL responded by asserting non-infringement and
`challenging the validity of Ericsson’s two patents. Id.
`In June 2015, Ericsson’s lawsuit was transferred to
`the Central District of California. On the parties’ joint
`motion, that court consolidated Ericsson’s lawsuit with
`TCL’s action, and stayed the parties’ respective claims
`regarding the infringement and validity of Ericsson’s
`two patents. C.A.J.A. 6650, 6653-6654. Accordingly,
`only claims involving whether Ericsson had offered to
`license its patents on FRAND terms remained active.1
`
`
`1 The district court also granted TCL’s motion to enjoin Er-
`icsson from prosecuting various patent infringement actions it had
`
`
`
`
`
`9
`
`2. Because TCL was initially seeking damages
`based on Ericsson’s breach of its FRAND obligations,
`the parties worked to identify what issues required a
`jury determination. Ericsson argued that the litigation
`should proceed in two steps. First, the jury would de-
`termine whether licensing proposals Ericsson made
`during litigation were FRAND. C.A.J.A. 1892-1893. If
`not, Ericsson argued that the court should reform the
`terms to make them FRAND as “an equitable determi-
`nation.” C.A.J.A. 1892.
`The court initially adopted a similar approach and
`ordered the parties to provide contentions defining the
`contents of a FRAND license. Ericsson’s contentions
`consisted of two fully-integrated license proposals: Op-
`tion A and Option B. C.A.J.A. 2718-2778, 4795-4857.
`Both included forward-looking royalties and a back-
`ward-looking “release payment covering past unli-
`censed sales by TCL,” C.A.J.A. 3191, as “consideration
`[for] the license granted herein,” C.A.J.A. 2748. TCL
`ultimately agreed that the release payment, if appro-
`priate, would be a component of the license being adju-
`dicated. C.A.J.A. 131911.
` 3. By mid-August 2016, the claims in the case had
`narrowed considerably. App. 8a. Not only had the pa-
`tent claims and counterclaims been stayed, supra p. 8,
`but the court had dismissed TCL’s damages claim.
`App. 8a. This left no legal claims to be addressed at
`trial. Instead, the only claims that remained sought a
`declaration as to whether Ericsson had complied with
`its FRAND obligation, and specific performance in the
`form of an injunction setting the terms of a new
`
`
`filed against TCL in other countries around the world. C.A.J.A.
`6639-6645, 6657-6659.
`
`
`
`
`
`10
`
`FRAND license and ordering the parties to abide by
`those terms. Id.; see App. 31a.
`Ericsson asserted that even though the patent
`claims were stayed and TCL’s damages claim had been
`dismissed, it still had the right to a jury trial because
`the “release payment” term of its proposed FRAND
`license was retrospective legal relief for TCL’s (un-
`proven) infringement. App. 8a. The district court re-
`jected Ericsson’s argument and ruled that no jury was
`required because the remaining relief sought was equi-
`table. C.A.J.A. 131997-131998; C.A.J.A. 132007.
`4. After a bench trial, the district court released a
`lengthy opinion finding that Ericsson had not offered
`fair and reasonable rates. App. 11a-13a. The court also
`found that Ericsson’s offer to TCL was discriminatory
`because it “radically diverge[d] from rates which Erics-
`son agreed to accept from licensees similarly situated
`to TCL.” App. 14a (quoting C.A.J.A. 120).
`its
`Having determined that Ericsson violated
`FRAND commitment, the district court carried out the
`parties’ mutual request that their license dispute be re-
`solved by crafting a global license with FRAND terms,
`to be imposed on the parties in the form of an injunc-
`tion. Consistent with the structure of Ericsson’s pro-
`posed license, the court divided TCL’s payments under
`the license into two categories. App. 15a; see App. 46a-
`47a. The first category was a prospective royalty for
`TCL devices sold for the next five years. App. 46a-47a.
`The second category was a “release payment for past
`unlicensed sales.” App. 46a.
`The court determined the prospective royalty rate
`by referencing the analyses it performed to determine
`whether Ericsson’s offers were FRAND. App. 15a.
`The chosen prospective royalty rate “generally fell
`
`
`
`
`
`11
`
`within the range of rates produced by those two ap-
`proaches where appropriate.” Id. The court then cal-
`culated the release payment by applying the prospec-
`tive royalty rate to TCL’s past unlicensed sales (sub-
`ject to certain adjustments). C.A.J.A. 131-133.
`In accordance with its bench trial decision, the dis-
`trict court on March 9, 2018 issued an Amended Final
`Judgment and Injunction containing the terms of the
`FRAND license. See App. 29a-58a. Beyond resolving
`the parties’ claims for declaratory and injunctive relief,
`the court also “dismissed without prejudice” as moot
`“[t]he parties’ claims and counterclaims regarding Er-
`icsson’s [individual] patents.” App. 56a. The mootness
`flowed from the fact that the injunction ordered Erics-
`son, upon receipt of the release payment and consistent
`with the fact that TCL was now licensed to practice Er-
`icsson’s patents, to “release TCL and all customers of
`TCL who have purchased or used products herein li-
`censed to TCL from claims for past patent infringe-
`ment.” App. 45a.
`
`D. Federal Circuit Proceedings And Remand
`1. Ericsson appealed to the Federal Circuit. App.
`16a. Beyond challenging several aspects of the district
`court’s FRAND analysis, “Ericsson argue[d] that it
`was deprived of its Seventh Amendment right because
`the court conducted a bench trial to adjudicate the re-
`lease payment term.” App. 20a. The Federal Circuit
`agreed. Id.2
`
`
`2 Ericsson also asserted two additional bases for its right to a
`jury trial: (1) “the declaratory judgment action tried by the court
`was an inverted patent infringement suit, which entitled Ericsson
`to a jury trial”; and (2) “the court resolved common issues that are
`typically litigated in a patent infringement suit for damages …
`
`
`
`
`
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