PATENT CASE OF THE WEEK 

TCL Communication Technology Holdings Ltd. v. Telefonaktiebolaget LM Ericsson, Appeal Nos. 2018-1363, et al. (Fed. Cir. Dec. 5, 2019)

In these appeals from the United States District Court for the Central District of California, the Federal Circuit deals with issues relating to the 7^th Amendment right to a jury trial. Specifically, the Federal Circuit reviewed whether Ericsson was entitled to a jury trial on the adjudication of a specific term of a court-ordered license. The license in question imposed “fair, reasonable and non-discriminatory” (FRAND) rates in a worldwide license on Ericsson and TCL for Ericsson’s portfolio of patents that were incorporated into 2G, 3G, and 4G mobile communications standards. The term in question was a “release payment” computed based on a retrospective FRAND royalty rate for TCL’s past unlicensed sales for practicing each standard.

Both parties proposed methodologies to calculate the FRAND rates, but the district court rejected them as flawed, and instead employed its own methodology. As discussed in more detail below, the Federal Circuit held that Ericsson was entitled to a jury trial on the calculation of the release payment, which was in substance compensatory relief for past infringing activity, and that by determining the amount itself, the district court deprived Ericsson of that right.

As background, by owning patents incorporated into the mobile communications standards, Ericsson is bound by a contractual FRAND obligation to the standards organization to offer TCL and other mobile device manufacturers FRAND-compliant terms to license its patent portfolio. In 2013 and 2014, Ericsson and TCL were negotiating a license in connection with TCL’s 4G mobile phones and Ericsson’s 4G patents; the parties had already negotiated similar 2G and 3G licenses. Before coming to an agreement, TCL filed a declaratory judgment action against Ericsson for failing to offer a FRAND rate to TCL, in which TCL asked the court to set a prospective FRAND rate for the license. The parties then agreed to engage in a separate binding court adjudication of terms for a worldwide portfolio license, which included patent infringement allegations against TCL. The cases were consolidated and the district court immediately enjoined Ericsson from further prosecuting any actions alleging infringement of the 2G, 3G, or 4G patents until the FRAND issues were resolved.

Before trial, the parties agreed that a jury would decide the common issue of whether Ericsson’s 4G license offer complied with its FRAND obligations, and if the jury answered no, a bench trial would be conducted to revise terms in the offer. By the time of trial, the only remaining claims and counterclaims sought specific performance or declaratory judgment as remedies, but Ericsson still insisted on a jury trial because the release payment term was “money for TCL’s past infringement,” which was “decidedly legal,” entitling Ericsson to a jury trial on all asserted claims. The district court disagreed and a bench trial proceeded, and Ericsson noted on the record that it had not waived its right to a jury trial. The district court issued its opinion, ruling in a single sentence that TCL’s remaining claims were equitable, and ignoring Ericsson’s argument about the legal nature of the release payment remedy. The district court also ordered that Ericsson’s patent infringement claims and TCL’s related counterclaims be dismissed without prejudice because they are “moot in light of the equitable relief granted in the release payment.”

On appeal, Ericsson argued that the district court’s decision was in error because (1) its determinations, at least in part, should have been determined by a jury, and because (2) they were premised on various errors in the court’s FRAND analysis. In its analysis, the Court explained that in cases that have legal and equitable claims, and issues common to both, the court must conduct a jury trial on any legal issues for which trial by jury is properly demanded. The Court agreed with Ericsson that the release payment term, which was adjudicated by bench trial, was legal relief that should have been tried by a jury, and did not reach Ericsson’s second argument as a result.

Specifically, since the substance of the relief sought was Ericsson’s compensation for TCL’s past patent infringement, the Court held that it amounted to legal relief as opposed to equitable relief. That the term was included in an injunction order or potentially ordered as restitution—TCL’s arguments—did not necessarily make it equitable. The Court also explained that the monetary nature of the relief did not by definition make it “legal” relief, but that since the release payment was “payment for past unlicensed sales,” which amounts to damages for past patent infringement, for which jury trials are available, the Court held this relief was legal in effect. Indeed, even the district court characterized the release payment as compensation for unlicensed use of Ericsson’s patents. The Court also explained that TCL’s attempt to characterize the payment as restitution was an improper focus on the form rather than the underlying substance of the relief.

The Court also held that Ericsson did not waive its right to a jury trial by consenting to a bench trial on the release payment term. The consent, according to the Court, was conditioned on an initial jury determination of whether Ericsson’s offers were FRAND. That, combined with Ericsson’s explicit identification of the release payment term as an alternative basis for a jury trial, was sufficient for the Court to find there was no waiver.

As such, the Court vacated the district court’s determination of the release payment and related determinations, reversed the dismissal of the related patent infringement claims and counterclaims as no longer moot, and remanded the case back to the district court.

The opinion can be found here.

ALSO THIS WEEK

Plastic Omnium Advanced Innovation and Research v. Donghee America, Inc., Appeal No. 2018-2087 (Fed. Cir. Nov. 21, 2019)

In an appeal from the District of Delaware, the Federal Circuit affirmed the grant of summary judgment of non-infringement. The case turned on the court’s construction of the “parison” terms in plaintiff’s patents. The Federal Circuit agreed with the district court’s claim construction that the patentee did not use the term “parison” in the “conventional, plain and ordinary manner.” Instead, the patents gave the term a “special definition,” which the Federal Circuit held the district court properly applied in determining whether defendant’s product literally infringed. The Federal Circuit also agreed with the district court that defendant’s product did not infringe under the doctrine of equivalents, because plaintiff had failed to present evidence why the undisputed differences in the parties’ products and claimed advantages of the same were insubstantial.

The opinion can be found here.