Research and Study Concerning the Method for Determining the Amount ofInfringement Damages for Standard Essential Patents
The First International Affairs Committee
Japan Intellectual Property Association
Abstract: In recent years, companies have increasingly used standards as a meansof supporting their global business operations. The continuing proliferation ofstandards throughout the world as a result of such trend is leading to an increasing
number of cases claiming damages for infringements of standard essential patents(SEPs) by users. This situation presents litigation risks that cannot be overlooked
by Japanese companies engaged in global business. It is important to understandthe approaches and bases being used by courts for determining the amount of
infringement damages for SEPs. This paper introduces the approaches being used
to determine the amount of infringement damages for SEPs, particularly those in
the United States, where many precedents are accumulating. It then considers somekey considerations in such approaches.
Table of Contents
1. Introduction
2. Method Used in the US for
Determining the Amount ofInfringement Damages
3. Impact of RAND Declarations on theAmount of Determination ofInfringement Damages in the US
3.1 Types of SEP Holders
3.2 Exercise of Patent Rights byDifferent Types of SEP Holders
3.3 Analysis
4. Determination in the US of theAmount of Infringement Damages inconsideration of the RAND
Obligations
4.1 Microsoft Case
4.2 Innovatio Case
4.3 Ericsson Case
4.4 Analysis
5. Considerations in Claims forInfringement Damages Based on
SEPs in the US
5.1 Considerations from theStandpoint of Alleged Infringer
5.2 Considerations from theStandpoint of SEP Holder
6. Determination in Japan of theAmount of Infringement Damages in
Consideration of the RAND
Obligations
6.1 Precedent in Japan
6.2 Outline of the Case
6.3 Determination of the Amount ofInfringement Damages
7. Comparison between the Methods
Used by US and Japanese Courts for
Determining the Amount ofInfringement Damages in
Consideration of the RAND
Obligations
8. Conclusion

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1. Introduction
When a company intends tostandardize its technology, it proposes
the technology to a standardization
organization, such as ISO.1)
During this procedure, the company
is requested by the standardization
organization to make a RAND
declaration. This declaration announces
that, if the company’s patent covering
the proposed technology becomes
essential to the implementation of astandard (i.e. Standard Essential Patent:
SEP), the company will license thepatentunder
Reasonable
andNon-Discriminatory terms (i.e. RAND
terms; in this paper, “RAND” includes
the concept of “FRAND,” with “F”
standing for “Fair”).
This measure is taken due to thefollowing reasons. In order for a third
party to manufacture a product incompliance with a standard, the third
party inevitably needs to implement the
SEPs for the technology essential tothat standard. If the holder of the SEPs
were allowed to freely seek an
injunction or demand high royalty, it
would be impossible for the third party
to enter the market by exploiting suchstandardized technology, leading to an
unreasonable limitation on competition.
However, even though companies
holding SEPs make RAND declarations,
there is no uniform standard for setting
royalties by these companies.
Some standards provide a systemcalled a “patent pool,” under which
licenses for a number of SEPs can beacquired collectively where certain
conditions are met. It is often difficult,however, to acquire licenses for all therequired SEPs through a patent pool.
License negotiations for SEPs
sometimes fail to reach agreement
between the parties and go to litigation,
because of disagreement over the
method for determining royalties thatsatisfy the relevant RAND terms.2)
To address this problem, we firstextracted 30 rulings from district courts
and CAFC rulings made in relation to
SEPs during the past five years in the
United States, where many precedents
are accumulating. We then picked up
and analyzed the four rulings in whicha basis for determining the amount of
infringement damages was specified.
Based on the findings, we identified
the considerations when dealing withcases of claims for SEP infringement
damages in the United States andexamined the application of thefindings to similar damages claim cases
in Japan, where there are very few
relevant precedents.
This paper was prepared by themembers of the Second WG, consistingof: Tadashi Ogawa (chairman, NTT),
YutakaIsogai(HondaMotor),
Yasuyuki Imazu (Sato Holdings),
Masatake Kinoshita (NHK Spring),
Yuichi Saho (Softbank Mobile), Naoki
Sendaya (Brother Industries), Gou
Shirouzu (Gigaphoton) and Masateru
Ito (vice-chairman, Olympus).

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2. Method Used in the US for
Determining the Amount ofInfringement Damages
Article 284 of the US Patent Law
provides to the effect that the claimantdamages shall be in no event less than areasonable royalty for the use made of
the invention by the infringer.3)
In addition, two methods fordetermining infringement damages (i.e.
the method for determining reasonableroyalty and the method for determining
lost profits) have been established bycommon law. In patent infringement
lawsuits in which the method for
determining reasonable royalty isadopted, the determination method
through virtual negotiation is used todetermine the amount of infringement
damages. 4)
When determining a royalty byusing the determination method
through virtual negotiation, the factors
specified in the Georgia Pacificruling5) (Georgia-Pacific factors) areconsidered in the context of each case.
These factors are used to virtually
determine the royalty that would havebeen agreed if the licensor and thelicensee had entered into negotiation
upon the commencement of an act of
infringement.
3. Impact of RAND Declarations
on the Amount of Determinationof Infringement Damages in theUS

3.1 Types of SEP Holders
Where a person has been involvedin standardization activities and if thepatent technology proposed by the
person to a standardization organizationis adopted as a standard, the person
becomes the holder of a SEP.
However, it is sometimes difficult
for a standardization organization tothoroughly investigate patents held by
third parties who are not involved instandardization activities, and patents
held by such third parties may possibly
be included in a standard.
Thus, SEP holders can be classified
into the following three types:
Type ASEP holders of this type are those
who
have
been
involved
instandardization activities and whose
patent technology that they proposed toa standardization organization was
adopted as a standard.
Type BSEP holders of this type are those
who have never been involved instandardization activities but whose
patenttechnology
devisedbythemselves was included in a standard.
Type CSEP holders of this type are those
who have never been involved instandardization activities but who
succeeded to a SEP.
3.2 Exercise of Patent Rights by

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Different Types of SEP Holders
The act of exploiting a standard
without the authorization of a SEP
holder constitutes an infringement of its
SEPs.
The
following
sub-sections
consider, based on the cases described
therein, how the existence of theobligations associated with a RAND
declaration (hereinafter, the “RAND
obligations”) affects the determinationof infringement damages when thethree different types of SEP holders
described above exercise their patentright against a person who exploits thestandard without authorization.
(1) Exercise of right by Type A SEP
holderA Type A SEP holder is assumed tohave made a RAND declaration when
the patent technology proposed by the
SEP holder was adopted by astandardization organization as astandard.
Notable examples of cases in whichsuch a SEP holder exercised its rightagainst an entity exploiting the standard
are the Microsoft case6), 7) and theEricsson case8), 9).
In these cases, the US courts held,concerning the amount of infringement
damages, that the amount should bedetermined after modifying the normal
method of determining the amount of
infringement damages by taking into
consideration the RAND obligations of
the SEP holder.

The modifications actually madewill be detailed in Section 4 below.
(2) Exercise of right by Type B SEP
holder
The CSIRO case10) is a good
example in which a Type B SEP holder
exercised its right.
CSIRO exercised its right against
CISCO and CISCO Linksys, alleging
that their products infringe the SEPs for
CSIRO’s four standards for wireless
LAN: 802.11a, 802.11g, 802.11n and802.11ac.11)
CSIRO had been involved in thestandardization activities for 802.11a
and made a RAND declaration for thatstandard only. For the other threestandards, CSIRO had not been
involved in standardization activities
nor had it made a RAND declaration.
Thus, CSIRO is regarded as a TypeA SEP holder with respect to 802.11a,while it is regarded as a Type B SEP
holder with respect to the other threestandards.
The US court held that, as for thecases of the three standards for which
CSIRO had not made a RAND
declaration, the infringement damages
should be determined by applying thenormal method for determining
infringement damages as is, because
CSIRO did not have the RAND
obligations.
In this case, the court applied thenormal method as is to determine theinfringement damages, based on its
view that the impact of the defendant’s

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unauthorized
implementationof
802.11a, for which CSIRO had the
RAND obligations, would be extremely
small like the other three.
(3) Exercise of right by Type C SEP
holderThe Innovatio case12) is an
example in which a Type C SEP holder
exercised its right.
Innovatio was a successor to the
SEPs for wireless LAN from a third
party and exercised its right based on
the SEPs against a manufacturer of awireless LAN device and the users of
the wireless LAN device.
Innovatio had not been involved in
the standardization activities nor had it
made a RAND declaration for thewireless LAN technology. However, a
RAND declaration had been made for
the SEPs by the third party before
Innovatio’s succession.
The US court held that, in asituation like this, it was reasonable toconsider that Innovatio had succeeded
to the RAND obligations when it
acquired the SEP, and that, similarly tocases where a Type A SEP holder
exercises its right, the infringement
damages should be determined byapplying the normal method for
determining infringement damages
after modifying it in consideration of
the RAND obligations.
3.3 Analysis
From the US precedents of theMicrosoft case and the Ericsson case(Type A) and the Innovatio case (TypeC), it can be seen that, where a US
court considers that a SEP holder has
the RAND obligations, it tends todetermine the infringement damages byapplying the normal method ofdetermining infringement damages
after modifying it in consideration of
the RAND obligations, regardless ofwhether or not the SEP holder itself had
made the relevant RAND declaration.
On the other hand, as seen from theprecedent of the CSIRO case (Type B),
where a US court decides that the rightbased on a SEP was exercised by a SEP
holder without the RAND obligations,the court tends to apply the normal
method as is to determine theinfringement damages.
Therefore, it can be concluded that,in the United States, whether or not a
SEP holder has the RAND obligations
affects
thedeterminationofinfringement damages by courts.
This conclusion raises the question:
how does a US court determine
infringement damages when it takes the
RAND obligations of a SEP holder into
consideration?
The following section introducessome specific determination methods inchronological order of the date ofissuance of the relevant rulings.
4. Determination in the US of theAmount of Infringement Damages
in consideration of the RAND
Obligations

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4.1

Microsoft Case

(1) Outline of the case
The Microsoft case is classified as
Type A, as introduced in Section 3.
Motorola made an offer of a license to
Microsoft, based on its SEPs for
H.26413) and 802.11. Motorola had
made RAND declarations for these
SEPs. In this offer, Motorola specified
a royalty of 2.25% on each of
Microsoft’s final products, such as
Xbox® and Windows®. Dissatisfied
with the royalty rate, Microsoft soughta court to determine a reasonableroyalty in consideration of the RAND
obligations.
In the same lawsuit, Motorola
claimed damages against Microsoft.
(2) Modification of Georgia-Pacificfactors
A SEP holder for a standard and theuser of the standard determine a royalty
satisfying the RAND terms throughindividual negotiation. In light of thisfact, the US court adopted the methodthat is used for determining areasonable royalty through virtual
negotiation, as the method for
determining infringement damages.
Asdescribed
above,
indetermination
throughvirtualnegotiation, the method that applies the
Georgia-Pacific factors is used todetermine infringement damages.
In the Microsoft case, however, theamount of infringement damages wasdeterminedbyapplyingtheGeorgia-Pacificfactors
after
modification (see Table 1), in
consideration of the RAND obligationsof the SEP holder and the fact thatusers of the standard must receive
licenses for SEPs from many SEP
holders.
This
measurereflected
therecognition of the US that the purposeof a RAND declaration should beinterpreted to expand the adoption of
the relevant standard and that, when
determining
theamountofinfringement damages for SEPs forwhich a RAND declaration had been
made, the hold-up problem (wherein astandard becomes unavailable due toprohibitively high royalties for some of
the SEPs of the standard) or the royalty
stacking problem (wherein a standard
becomes unavailable due to theprohibitively high cumulative total of
the royalties for all the SEPs of thestandard)
shouldbegiven
consideration.
The court in the Microsoft case first
determined the royalties satisfying the
RAND terms and the upper and lower
limits for the royalties satisfying the
RAND terms, based on the modified
Georgia-Pacific factors and using as
indices the business practices for the
license business related to patents forwhich RAND declarations were made,etc., and then specified the amount of
infringement damages for each SEP.
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infringement damages
1) Determination of the amount of
infringement damages for SEP H.264(i) Royalty satisfying the RAND terms
Many of the SEPs for the H.264
standard have been licensed through apatent pool. Moreover, there are manylicensees in the patent pool. Based onthese facts, the royalty of the patentpool license was used as an index fordetermining
theamountofinfringement damages.

Table 1 Modification of Georgia-Pacific factors
No. Georgia-Pacific factors
Modified Georgia-Pacific factors
as applied
1 Royalties for licensing the patent Royalties should be those agreed(established royalties)
upon through negotiation under
the RAND obligations orequivalent terms.
2 Royalties licensee pays for use of No modification
other comparable patents
3 Nature and scope of license in No modification
termsofexclusivity/non-exclusivity,
territorial
restrictions
andcustomer restrictions
4 Policytomaintainpatent In light of the RAND
monopoly by restricting the acts declaration, the policy toof licensees
maintainpatentmonopolyshould not be considered.
5 Commercial relationship between In light of the RAND
licensor and licensee, such as declaration,commercial
whether they are competitors
relationship should not be
considered.
6 Degree of contribution to the sales Where the degree of contributionof the patented invention, and to the sales of the patented
effect of deriving non-patented or invention, etc. are considered,derivative products
the value of the patenttechnology and the value ofbeing adopted into a standard
should be distinguished.
7 Duration of patent and term of No modification
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8

Profitability of the patented
invention, such as commercial
success and attainment of
popularity

9

Utility of patent property overexisting products

10 The nature and feature of thepatented invention, and the benefit
of users

11 The extent of infringement of thepatent and its evidence

12 Customary profitability rate for
specific products or competitive
products

Where the profitability of thepatented invention is considered,the value of the patenttechnology and the value ofbeing adopted into a standard
should be distinguished.
Utility of patent property should
be compared with the technologythat was able to be described in
the standard, rather than withpatent technology.
Where the nature of the patented
invention, etc. is considered, thevalue of the patent technology
and the value of being adopted
into a standard should be
distinguished.
Where
the
extentofinfringement, etc. is considered,the value of the patenttechnology and the value ofbeing adopted into a standard
should be distinguished.
When determining customaryrates, the business practices forthe license business for thepatent for which a RAND
declaration was made should beconsidered.
Where the portion of realizableprofit attributable to the patent is
considered, the value of thepatent technology and the valueof being adopted into a standard
should be distinguished.

13 The portion of realizable profit
attributable to the patent as
distinguished from non-patented
elements,
manufacturing
processes,
businessrisks,
significant
featuresand
improvements added by the
infringer
14 Opinions and testimonies of No modification
qualified experts
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15 Royalties that would have been
agreed upon through hypotheticalarm’s length negotiation at thetime when infringement began
Microsoft was both a licensor andlicensee of the patent pool. Motorola
was not a licensor of the patent pool.
The court first found that royalties
through individual negotiation are
generally higher than those of a patentpool. Then, in consideration of thevalue expected if Microsoft joined thepatent pool and the value expected if
Motorola did not join the patent pool,the court held that the royalty satisfying
the RAND terms would
be 0.555 cents per unit. This
amount was three times higher than theroyalty to be received by Motorola if
Motorola had joined the patent pool asa licensor. The court also held that theamount was the lower limit of theroyalty to which Motorola was entitled.
The royalty to which Motorola
would have been entitled if it had
joined the patent pool was determinedbased on the ratio of the number ofpatents held by Motorola in various
countries to the number of patents ofthe patent pool that had been granted invarious countries, on the assumptionthat Motorola and all the SEP holders
for the H.264 standard who had made a
RANDdeclaration
tothestandardization organization joined thecurrent patent pool as licensors under
the same terms and conditions.

Royalties that would have been
agreed upon through arm’s
length negotiation should bedetermined in light of the RAND
declaration and its purpose.
(ii)Lower limit of royalty satisfying the
RAND terms
As described above, the court
judged that the lower limit of theroyalty satisfying the RAND terms was
0.555 cent per unit.
(iii)Upper limit of royalty satisfying the
RAND terms
Among all the royalties submitted
as evidence, the court adopted, as anindex for determining the upper limit of
the amount of infringement damages,
the royalty proposed during discussion
concerning the launch of the patentpool for H.264, which was the highest
royalty of all the patents for which a
RAND declaration was made.
Then, similarly to the method used
when determining a royalty satisfying
the RAND terms, the court decided theupper limit as 16.389 cents per unit,
based on the recognition that the upper
limit would be the amount equal tothree times the royalty to which
Motorola would have been entitled if it
had joined the patent pool and if thepatent pool had adopted that royalty.
(iv) Specification of the amount of
infringement damages
For Xbox(R) and Windows(R), thecourt decided that the amount of

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infringement damages should be either
0.555 cents per unit (which was theroyalty satisfying the RAND terms
royalty) or an amount within the range
between the lower limit (i.e. 0.555
cents per unit) and the upper limit (i.e.
16.389 cents per unit) of the royalty
satisfying the RAND terms. For otherproducts, the court specified theamount of infringement damages to be
the lower limit, i.e. 0.555 cents per unit.
2) Determination of the amount of
infringement damages for SEPs for the802.11 standard(i) Royalty satisfying the RAND terms
The court considered that, althougha patent pool for the 802.11 standard
exists, the patent pool could not be said
to have been successful compared withthat for the H.264 standard in terms ofthe number of patents granted and thenumber of licensees. Therefore, thecourt chose not to use the royalty ofthat patent pool as the only index fordetermining
theamountofinfringement damages for the 802.11
standard.
Microsoft was neither a licensor nor
licensee of the patent pool. Motorola
was not a licensor of the patent pool,
either.
The court adopted two additional
royalties as indices. One was theroyalty being paid by Marvel to ARM
for the latter’s SEPs of the 802.11
standard. The other was the royalty
specified in a report of Intecap, which
had been prepared in consideration of

the SEP royalty stacking problem. The
court combined the three indices todetermine the royalty satisfying the
RAND terms.
More specifically, based on the firstindex, the court obtained 6.114 cents
per unit by tripling the royalty to bereceived by Motorola if Motorola hadjoined the patent pool for 802.11 as alicensor, in the same manner as thedetermination with respect to H.264.
The amount obtained from the second
index, which was the royalty being paidby Marvel to ARM, was 3.5 cents perunit. The third index, which was theamount estimated in the Intecap reportas the royalty to be received byMotorola, was adjusted based on an
expert testimony, resulting in an
amount of 0.8 cents per unit. The court
averaged these three amounts anddetermined that 3.471 cents per unit
would be the amount of the royalty
satisfying the RAND terms.
(ii) Lower limit of royalty satisfying the
RAND terms
In the absence of sufficientevidence for determining the lower
limit, the court decided that it would be
able to use the amount determinedbased on the Intecap report, i.e. 0.8
cents per unit, as the lower limit.
(iii) Upper limit of royalty satisfying
the RAND terms
The court judged that the upper
limit would be an amount of 19.5 cents
per unit. This amount was three times

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higher than the amount of the royalty
which was determined based on theroyalty of the patent pool for 802.11
and which had been proposed byMicrosoft to Motorola.
(iv) Specification of the amount of
infringement damages
For Xbox(R), the court decided thatthe amount of infringement damages
should be either 3.471 cents per unit
(which was the royalty satisfying the
RAND terms royalty) or an amountwithin the range between the lower
limit (i.e. 0.8 cents per unit) and theupper limit (i.e. 19.5 cents per unit) of
the royalty satisfying the RAND terms.
For other products, the court specified
the amount of infringement damages tobe the lower limit, or 0.8 cents per unit.
4.2 Innovatio Case
(1) Outline of the case
The Innovatio case, classified as
Type C, was instituted by Innovatio toclaim against a manufacturer of awireless LAN device, etc. forinfringement damages, based on 19
SEPs related to the technology ofwireless LAN, to which Innovatio had
succeeded from a third party.
(2) Determination of the amount of
infringement damages
The trial was conducted on theassumption that Innovatio had the
RAND obligations, since, as mentioned
above, Innovatio itself did not make a

RAND declaration but one had been
made for the SEPs before Innovatio
succeeded to them.
In consideration of the RAND
obligations of Innovatio, the amount of
infringement damages was determinedin a similar manner as the Microsoft
case, that is, the Georgia-Pacific factors
were applied after modification andcare was taken so as not to cause theroyalty stacking and other problems toarise.
Specifically,
the
court
first
specified the upper limit of the royalties
for all the wireless LAN SEPs,
including the 19 SEPs held by
Innovatio, to be 1.8 dollars per unit,
which was the average amount of profit
from the wireless LAN chip. The court
then determined the royalty satisfying
the RAND terms to be 9.56 cents perunit, based on the portion of realizableprofit attributable to Innovatio’s SEPs.
This was the amount at which theamount of infringement damages wasdetermined.
When specifying the contribution of
Innovatio’s SEPs to the standard, thecourt relied on an expert testimony that,among approximately 3,000 SEPs forthe wireless LAN, 300 SEPs accounted
for 84% of the contribution to thewireless LAN function of the electronic
device, and that the 19 SEPs of
Innovatio were included in the 300
SEPs.
4.3 Ericsson Case

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(1) Outline of the case
The Ericsson case, classified as
Type A as introduced in Section 3, wasinstituted by Ericsson to claim against
D-Link, etc. for infringement damages,
based on 9 SEPs related to the 802.11
standard.
(2) Determination of the amount of
infringement damages
1) District court ruling
A district court found infringementof 3 out of 9 SEPs and the amount of
infringement damages was presented.
The amount of infringement
damages was determined as 0.15
dollars per unit, and the total amount of
infringement damages individually
imposed on the defendants ranged fromapprox. 0.45 million dollars to approx.
3.5 million dollars.
The amounts of infringement
damages approved by the jurors wereobtained by using the determination
method that was proposed by the expert
designated by Ericsson. This method
determined the royalty satisfying the
RAND terms in two phases.
In the first step, the method
determined the royalty for the entire
portfolio of Ericsson’s SEPs involvedin the 802.11 standard, based on thelicense revenue achieved by Ericsson
from the entire portfolio.
In the second step, the method
distributed the royalty for the portfolio
determined in the first step among all
the relevant SEPs, and determined theamount of royalty for the SEPs thatwere covered by the litigation byremoving the amount attributable to the
SEPs that were not covered by thelitigation.
The license revenue from the entire
portfolio of the SEPs involved in the802.11 standard, determined in the firststep, was obtained with reference to thesix license agreements actually
executed by Ericsson.
The district court recognized thatthe royalty thus determined satisfied the
RAND terms, because it could be said
that the RAND terms had already beenfactored in, on the grounds that (a)Ericsson had entered into these license
agreements after making RAND
declarations and (b) the royalties for the
license agreements actually executedby Ericsson reflected the value of thepatents of Ericsson in the market.
D-Link,etc.
madeacounterargument by presenting anexpert testimony
that, if thedetermination method proposed by theexpert designated by Ericsson was
adopted, the royalty stacking problem
would arise because the theoreticalcumulative royalty for the chipcomplying with the 802.11 standard
priced at 2.50 dollars per unit would
amount to 23.30 dollars per unit. The
district
court
dismissedthecounterargument, stating that thedefendants failed to present evidence
concerning whether or not the royalty
stacking problem would arise on actual
products.

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2) CAFC ruling
D-Link, etc. appealed to the CAFC
against the decision of the district court.
The CAFC referred the case back to the
district court on the grounds that there
were three errors in the charge to thejurors:(i) The district court failed to charge thejurors to sufficiently consider thecontent of the RAND declaration
actually made by Ericsson.
(ii) The court failed to charge the jurors
to separate the value of the patenttechnology from the value of the entire
standard.
(iii) The district court did not charge
the jurors that a royalty satisfying the
RAND terms should be determinedbased on the fact that the value of theinvention, rather than the value of being
included in the standard, satisfies the
RAND terms. Instead, the district court
charged the jurors to consider the
Georgia-Pacific factors, which wereirrelevant to this case.
Regarding the application of the
Georgia-Pacific factors, the CAFC
pointed out that, under the RAND
terms for this case, at least factor Nos.
4, 5, 8, 9 and 10 are irrelevant and thatthe other factors should have been
applied after modification.
The CAFC further argued that,when determining the amount of
infringement damages in considerationof the RAND obligations, theuniformly-modified
Georgia-Pacificfactors should not be applied
automatically as if they were formulas,but that these factors should be
modified as appropriate according to
the content of the RAND declaration
actually made.
Regarding the method used by the
district court of determining the amountof infringement damages with reference
to the royalties for the license
agreements actually entered into by
Ericsson, the CAFC denied the validityof such method, on the grounds thatthese royalties were the result of also
reflecting
the
value
of
the
cross-licenses, etc. between the parties
to the agreements and thus the royalties
should not be considered to be the samein nature as the royalties at the time of
infringement.
As for the validity of thecounterargument by way of raising theroyalty stacking problem and thehold-up problem, the CAFC supported
the decision of the district court, basedon a similar finding that it was
impossible to discuss such problems
unless evidence concerning whether or
not such problems would arise on
actual products was presented.
4.4 Analysis
From the precedents of theMicrosoft case, the Innovatio case andthe Ericsson case, it can be seen that
US courts are likely to apply the
Georgia-Pacificfactors
after
modification when determining the910

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amount of infringement damages inconsideration of the RAND obligationsof a SEP holder.
In the Microsoft case and theInnovatio case, in which theGeorgia-Pacific factors were applied
after modification, each court took theroyalty stacking problem, etc. into
consideration and specified thecumulative royalty, which included theroyalties for the SEPs in suit and thosefor the other SEPs involved in thestandard. The court then determined theroyalty that satisfied the RAND terms
by distributing the cumulative royalty
across all the SEPs based on the
different degrees of contribution ofthese SEPs to the standard, etc.
Furthermore, in the Ericsson case,which was referred back to the district
court by the CAFC, a similar finding
was presented by the CAFC that thevalue of the patent technology should
be separated from the value of theentire standard.
Based on the foregoing, where themethod of determining the amount of
infringement damages in considerationof the RAND obligations is used, theresultant amount of infringement
damages is expected to be lower than
the amount obtained by the normal
method of determining the amount of
infringement damages.
Within the scope of the present
research, the Microsoft case was the
only case in which the content ofmodification of the Georgia-Pacificfactors was expressly indicated. The

Innovatio case, which followed theMicrosoft case, simply applied theGeorgia-Pacificfactors
after
modification.
It should be noted, however, theCAFC ruling of the Ericsson case heldthat the Georgia-Pacific factors should
be modified appropriately according to
the content of the RAND declaration
actually made. In the future, it is likelythat the Georgia-Pacific factors will be
modified on a case-by-case basis fordetermining
theamountofinfringement damages.
5. Considerations in Claims forInfringement Damages Based on
SEPs in the US
5.1 Considerations from theStandpoint of Alleged Infringer
When the right based on SEPs isexercised and infringement damages
are claimed, the alleged infringer firstneeds to verify whether or not a RAND
declaration has been made by the SEP
holder claiming the right.
In general, the RAND declaration
statuses for SEP holders can be
confirmed on the website of therelevant
standardization
organization.14)
It should be noted that, as impliedby the Innovatio case, even where the
SEP holder itself has not made a
RAND declaration for the SEPs, theSEPs may be handled as one for whicha RAND declaration was made if the911Intellectual Property Management Vol.65 No.7 2015

SEPs were succeeded to from theprevious holder who made a RAND
declaration.
Therefore, if the SEPs based on
which the right was claimed have beensucceeded to by the claimant, thealleged infringer should verify whether
or not a RAND declaration was made.
If the SEP holder was found to havemade a RAND declaration, the alleged
infringer should consider whether or
not the amount of the infringement
damages claimed by the SEP holder isequivalent to a royalty satisfying the
RAND terms.
This is necessary because, if not,the alleged infringer may be able toallege a breach by the SEP holder ofthe RAND obligations.
When judging whether or not theamount of infringement damages
claimed by the SEP holder is equivalent
to a royalty satisfying the RAND terms,
it is desirable for the alleged infringer
to collect information necessary toestimate the different levels of royalty
for the different numbers of SEPs.
However, it is usually difficult to
identify a royalty satisfying the RAND
terms from the information disclosed
on the website of a standardization
organization, because the patents forwhich a RAND declaration was madeto the standardization organization may
not necessarily be SEPs, and because
the standardization organization may
not provide information concerning
recommended royalties, etc.
Therefore, the alleged infringer

should consider identifying a royalty
satisfying the RAND terms by othermeans. For example, the alleged
infringer may use a commercial report,such as Intecap reports mentioned
above, if available. Otherwise, where apatent pool is provided by a patent pool
agent, the alleged infringer may obtain
information concerning the number oflicensed SEPs in the patent pool and thecorresponding royalties.
If the SEPs for which the claim wasinstituted can be proved to make alower contribution to the standard thanthe other SEPs, the alleged infringer
should consider claiming that aspect.
For example, if a commercial report,
etc. assesses the degrees of contributionof different SEPs to the standard and astatement that the degree ofcontribution of the SEPs in suit is lower
than the others, the alleged infringer
may argue by using the report, etc. as
evidence.
This is because if the degree ofcontribution is lower, the royalty
satisfying the RAND terms may be
determined at a lower level.
Finally, where the alleged infringer
accepts the amount of infringement
damages claimed by the SEP holder,
the alleged infringer may argue that the
cumulative royalty for the SEPs will
become prohibitively high. However,such argument would not be supported
unless the alleged infringer can provethat the royalty stacking problem mayarise as a result of a significant increasein the amount of cumulative royalty.

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5.2 Considerations fromStandpoint of SEP Holder

theWhen exercising the right based on
SEPs as a SEP holder, the SEP holder
should confirm the status of past
RAND
declarations
tothestandardization organization.
This is because where the SEP
holder itself has made a RAND
declaration to a standardization
organization and owes the RAND
obligations, it needs to claim
infringement damages in the amountdetermined based on the royalty
satisfying the RAND terms.
Where the SEP holder has
succeeded to the SEP, it should verify
whether or not a RAND declaration has
been made for the SEPs before thesuccession.
If a RAND declaration has been
made before the succession, the SEP
holder may be deemed to have the
RAND obligations even though the
SEP holder itself has not made the
RAND declaration.
An appropriate method for the SEP
holder to prove that it is claiming theinfringement damages in the amountdetermined based on the royalty
satisfying the RAND terms would be to
first collect information concerning thedifferent levels of royalty for thedifferent numbers of SEPs that are
customarily imposed, and then explainthattheclaimedamountofinfringement damages is justifiable inlight of the number of SEPs of the SEP
holder.
Furthermore, if the SEPs of the SEP
holder can be proved to make a higher
contribution to the standard than theother SEPs, the SEP holder should
consider claiming that aspect.
For example, if a commercial report,
etc. assesses the degrees of contributionof different SEPs to the standard andstates that the degree of contribution of
the SEPs of the SEP holder is higher
than the others, the SEP holder may
argue by using the report, etc. as
evidence.
This is because if their degree ofcontribution is higher, the royalty
satisfying the RAND terms applied to
the SEPs of the SEP holder will be able
to be determined at a higher level.
6. Determination in Japan of theAmount of Infringement Damages
in Consideration of the RAND
Obligations
6.1 Precedent in Japan
In Japan, the method for
determining
theamountofinfringement damages for SEPs subject
to the RAND obligations was specified
in only one case,15) which was ruledby the Intellectual Property High Court.
6.2 Outline of the Case
The case considered whether or not
Samsung
Electronics
Co.,
Ltd.

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(“Samsung”) is entitled to exercise theright to claim compensation fordamages against Apple Japan Limited
Liability Company (“Apple”) on the
ground that the smartphone and thetablet device of Apple infringe the
SEPs for the UMTS16) standard forwhich Samsung made a RAND
declaration.
The Tokyo District Court held that
Samsung was in breach of the goodfaith obligation to conduct negotiations
in good faith, and thus was not
permitted to exercise the right to claim
compensation for damages under the
SEPs against Apple because theexercise constituted an abuse of right.
As reasons for finding Samsung’s
breach of the good faith obligation, thecourt gave the fact that, during license
negotiation, Samsung failed to provide
Apple with specific information thatproved that the license terms presented
by Samsung satisfied the RAND terms.
However, in the intermediate
appeal filed by Samsung against theTokyo District Court’s decision, theIntellectual Property High Court
ordered Apple to pay the infringement
damages to Samsung, based on its
findings that the exercise of the right toclaim compensation for damages under
the SEPs was limited to within thescope of the royalty under the RAND
terms and therefore it did not constitutean abuse of right.
6.3 Determination of the Amountof Infringement Damages

The Intellectual Property High
Court
recognized
that
when
determining
theamountofinfringement damages satisfying the
RAND terms, measures to suppress theexcessive accumulation of royalties for
SEPs should be taken. Based on thisrecognition, the court first determined
the royalty rates for the smartphone andthe tablet device by using the formula
shown below, and then determined theamount of infringement damages bymultiplying the total sales amounts ofthe smartphone and the tablet device by
the respective royalty rates.
(Royalty rate) = (a) * (b) * (c)(a) Upper limit of the cumulativeroyalty rate(b) Contribution of the subject SEPs to
the UMTS standard(c) Contribution of the UMTS standard
to the sales of the infringing productFor (a) Upper limit of the
cumulative royalty rate, a rate of 5%
was used, on the grounds that the patentpool for W-CDMA17), which wasestablished by the holders of the SEPs
in the UMTS standard, employed asystem to limit the maximum
cumulative royalty rate for the SEPs to
5% and other factors.
For (b) Contribution of the subject
SEPs to the UMTS standard, the court
used the figure obtained by dividing thenumber of the subject SEPs by the total
number of SEPs, on the grounds that

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there is no particular evidence to judge
that the contribution of the subject
SEPs was higher than the other SEPs.
For the number of SEPs in the
UMTS standard, a Fairfield Report was
adopted as evidence and the number
was determined to be 529.
In order to specify the royalty
rate in compliance with the RAND
terms, the court recognized that, among
the total sales of the infringing product,
only the portion attained due to thecompliance with the UMTS standard
should be used as the basis fordetermining
theamountofinfringement damages. Based on thisrecognition, the court multiplied (a) and(b) by (c).
For (c), the court recognized thatthe degree of contribution of the UMTS
standard to the sales of the tablet device
was lower than that to the sales of thesmartphone because the tablet device,when in use, did not necessarily need
the mobile communication function
implemented by the UMTS standard.
Based on this recognition, the court
specifieddifferent
degreesofcontribution for the tablet device andthe smartphone, based on the selling
prices of the baseband chips, the featurephones, etc. used on these products.
7. Comparison between the
Methods Used by US andJapanese Courts for Determining
the Amount of Infringement
Damages in Consideration of the
RAND Obligations

The Intellectual Property High
Court in Japan first specified the upper
limit of the cumulative royalty rate forall the SEPs included in the standard. Itthen determined the royalty ratesatisfying the RAND terms by firstallocating a portion of the upper limit
cumulative royalty rate to the subject
SEPs based on their contribution to thestandard and then multiplying theresulting figure by the contribution of
the standard to the sales of theinfringing product.
On the other hand, in theMicrosoft case and the Innovatio case,the US courts first specified thecumulative royalty, which included
those for the other SEPs in the standard,
and determined the royalty ratesatisfying the RAND terms by
allocating a portion of the cumulativeroyalty to the SEPs in suit based on
their contribution to the standard.
In other words, the methods fordetermining
theamountofinfringement damages used by theJapanese and US courts both determine
the royalty rate and the royalty for the
infringing product by first specifying
the upper limit of the cumulativeroyalty rate and the cumulative royalty,
and then allocating these cumulative
figures to the subject SEPs based on
their contribution to the standard.
This shared approach between the
US and Japanese courts reflects thecommon recognition by these courts
that, when the RAND obligations are

915Intellectual Property Management Vol.65 No.7 2015

takeninto
consideration,adetermination method that will at least
not cause the royalty stacking problem
to arise should be adopted.
There is only one precedent inJapan as described above. However,considering the common recognition
between the US and Japanese courts,
the considerations in claims forinfringement damages based on SEPs
in the United States discussed in
Section 5 provide a useful reference
when dealing with cases claiming
damages in Japan.
8. Conclusion
Among recent precedents in theUS, there are no cases where an
injunction demand against an alleged
infringer under SEPs for which a
RAND declaration had been made wasapproved18). Moreover, within thescope of the present research, it can beseen that the amounts of infringement
damages awarded under SEPs were
specified within the range satisfying the
RAND terms.
There do exist cases in which,despite the plaintiff being a SEP holder,
the amount of infringement damages
was determined without considerationof the RAND obligations. However, inlight of the fact that an entity intending
to make a technical proposal to a
standardization
organizationisgenerally requested to make a RAND
declaration, such cases are rather
exceptional.

Therefore, if the recent trend in
judicial precedents continues, users ofstandards are in general able to utilize
standards without worry. From thestandpoint of SEP holders, however,license negotiations with users of thestandard may become harder. Theremay indeed be more situations where a
SEP holder cannot avoid filing with acourt a claim for compensation fordamages in order to obtain a properamount of infringement damages.
The number of precedents of cases
claiming damages under SEPs is still
small, even including those in the US.
In addition, only a district court
specified a method for determining theamount of infringement damages.
Considering these facts, CAFC or othercourts are expected to make specificmodifications to this method in the
future.
Thus, both users of standards and
SEP holders should continue studying
the latest precedents in various
countries, mainly in the US, so as tokeep up with changing trends injudicial decisions by courts.
Finally, we sincerely hope thispaper will provide useful information to
Japanese companies doing business in
the US.
Notes:
1) “事業戦略への上手な国際標準化
活 用 の ス ス メ (Encouragement of
Effective Utilization of International
StandardizationinBusiness
Strategies)” by 事業戦略と標準化

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経 済 性 研 究 会 (Society for
Business
Strategy
andStandardization Cost Efficiency),(First Edition), (March 2007)
2) “標準規格必須特許の権利行使に関する調査研究（Ⅱ）(Report on
Research and Study Concerning
Exercise of Rights under Standard
Essential Patents (II)), Institute ofIntellectual Property (March 2013)3) 35 U.S.C.§284
4) Panduit Corporation v. Stahlin Bros.
Fibre Works, Inc., 298 F. Supp. 435(W.D. Mich. 1969)
5) Georgia-Pacific Corp. v. UnitedStates Plywood-Champion Papers,
Inc. 318 F. Supp. 1116 (S. D.N.Y.
1970)6) Microsoft Corp. v. Motorola, Inc.,696 F.3d 872 (9th Cir. 2012)7) Microsoft Corp. v. Motorola, Inc.,
2:10-cv-01823-JLR (W.D. Wash.
Apr. 25, 2013)
8) Ericsson Inc. v. D-Link Sys., Inc.,
No. 10-CV-473 (E.D. Tex. Aug. 6,
2013)9) Ericsson Inc. v. D-Link Sys., Inc.,
Nos. 2013-1625, -1631, -1632, -1633(Fed. Cir. Dec. 4, 2014)
10) Commonwealth Scientific & Indus.
Research Org. v. Cisco Systems, Inc.,
No. 6: 11-cv-343 (E.D. Tex. July 23,
2014)
11)
http://www.ieee802.org/11/(referred on Feb. 2, 2015)12) In re Innovatio IP Ventures, LLC
Patent Litigation, 956 F. Supp. 2d925 (N.D. Ill. 2013)13)

http://www.itu.int/rec/T-REC-H.264(referred on Feb. 2, 2015)14)
http://standards.ieee.org/about/sasb/p
atcom/pat802_11.html (referred on
Feb. 2, 2015)15) Intellectual Property High Court2013 (Ne) No. 10043 case decision(rendered on May 16, 2014)16)
http://www.3gpp.org/technologies/keywordsacronyms/103-umts (referredon Feb. 2, 2015)17)
http://www.3gpp.org/technologies/keywordsacronyms/104-w-cdma(referred on Feb. 2, 2015)18) “知財管理” (IP Management), Vol.
64, No. 7, pp. 1036-1050 (2014)(Manuscript received on March 9,
2015)

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