Opinion ID: 3159695
Heading Depth: 2
Heading Rank: 3

Heading: tla

Text: Finally, Cisco argues that the district court clearly erred in basing its damages model on the parties’ negotiating positions, rather than on the TLA between CSIRO and Radiata. As the district court heard competing testimony regarding the relevance of the TLA, the Rate Card, and the Lang offer, the district court’s decision about how to weigh and credit this varying evidence is a finding of fact entitled to deference. See Santarus, Inc. v. Par Pharm., Inc., 694 F.3d 1344, 1358 (Fed. Cir. 2012) (“The district court’s findings of fact are entitled to deference . . . .”). However, we find clear error in at least three of the district court’s reasons for rejecting the TLA, and therefore direct the court on remand to reevaluate the relevance of the TLA in its damages analysis. In brief, the district court provided four reasons for rejecting the TLA evidence. First, the district court found that the close relationship between CSIRO and Radiata— Radiata was founded by three Australian individuals on CSIRO’s campus—“belies the view that the negotiations leading to the TLA were purely disinterested business negotiations.” Commonwealth Sci., 2014 WL 3805817, at . Second, the district court found that the TLA’s development requirements meant that: Radiata had significant obligations to CSIRO, including disclosing its business plans concerning the patented technology, a requirement to use its best efforts to exploit the technology, and mini- mum performance obligations. CSIRO was also entitled to a royalty-free license to any improvements Radiata contributed to the technology and an assignment of all rights in those improvements upon termination of the TLA. Id. Third, the district court found that “[a]nother obstacle to relying on the TLA rates is the timing of the agreement.” Id. The TLA was signed in 1998, four and five COMMONWEALTH SCIENTIFIC v. CISCO SYSTEMS, INC. 21 years, respectively, before the hypothetical negotiation dates of 2002 and 2003, during which time the “[c]ommercial viability of the technology escalated sharply . . . .” Id. Finally, the district court found that “the primary problem with Cisco’s damages model is the fact that it bases royalties on chip prices.” Id. The majority of these findings do not support a wholesale rejection of the TLA. Most importantly, as to reason three—timing—the district court ignored evidence that CSIRO and Cisco twice amended the TLA, once in con- junction with Cisco’s purchase of Radiata in 2001, and again in September 2003. These amendments occurred at about the time the hypothetical negotiations would have taken place, and therefore bear consideration. While Commonwealth argues that the amendments are irrelevant because Commonwealth could not have renegotiated the royalty rates at the time, that is untrue. At the time of the 2001 and 2003 amendments, Commonwealth had the right to terminate the agreement or permit a sublicense. Both of these options provided a lever with which Commonwealth could have renegotiated royalty rates during the amendment process. The amendments also refute the district court’s first reason for discounting the TLA—the close relationship between Commonwealth and Radiata. By the time of the amendments, the special relationship between Commonwealth and Radiata no longer existed, and therefore does not provide reason to reject the relevance of the asamended TLA to the hypothetical negotiation. Finally, the district court’s fourth reason—that the TLA uses chip prices as the royalty base—runs afoul of Ericsson’s holding that a license may not be excluded solely because of its chosen royalty base. Ericsson, 773 F.3d at 1228. Because many of the district court’s reasons for discounting the TLA were flawed, we direct the court on 22 COMMONWEALTH SCIENTIFIC v. CISCO SYSTEMS, INC. remand to reevaluate the relevance of the as-amended TLA in its damages analysis. This agreement is the only actual royalty agreement between Cisco and Commonwealth; it is contemporaneous with the hypothetical negotiation; it was reached before the 802.11g standard was adopted; and it focuses on the chip. To be sure, some other obligations running from Cisco to Commonwealth survived the amendments, e.g., the licensing of improvements. These factors, among others, should be taken into account in the district court’s analysis.