Opinion ID: 2822000
Heading Depth: 4
Heading Rank: 1

Heading: Whether Motorola’s actions were contrary

Text: to the reasonable and justified expectations of other parties to the contract; (2), whether Motorola’s conduct would frustrate the purpose of the contract; (3), whether Motorola’s conduct was commercially reasonable; (4), whether and to what extent Motorola’s conduct conformed with ordinary MICROSOFT CORP. V. MOTOROLA, INC. 41 custom or practice in the industry; (5) to the extent the contract vested Motorola with discretion in deciding how to act, whether Motorola exercised that discretion reasonably; (6), subjective factors, such as Motorola’s intent and whether Motorola had a bad motive.16 Microsoft offered significant evidence upon which the jury could apply this standard and infer that the injunctive actions violated Motorola’s good faith and fair dealing obligations. The district court identified the testimony of five different experts from which the jury could conclude that Motorola’s actions were intended to induce hold-up, i.e., to pressure Microsoft into accepting a higher RAND rate than was objectively merited, and thereby to frustrate the purpose of the contract. See Microsoft I, 696 F.3d at 877. The jury heard, for example, that an injunction against Microsoft’s use of Motorola’s 802.11 and H.264 SEPs “[w]ould have [had] crippling consequences, because . . . [p]eople wouldn’t buy a computer that doesn’t have WiFi . . . [or] a computer that wouldn’t be able to play back highdefinition video.” The evidence that the rates Motorola sought were significantly higher than the RAND rate found by the court suggested that Motorola sought to capture more than the value of its patents by inducing holdup, and that it 16 Motorola provides no persuasive support for its argument that instructing the jury to consider the six factors “alone or in combination” was improper. If anything, the cases it cites tend to dispel Motorola’s contention that breach must be premised on a variety of factors, as they focus on a defendant’s bad intent or motives. See, e.g., In re Estate of Hollingsworth, 560 P.2d 348, 351–52 (Wash. 1977) (en banc); Cavell v. Hughes, 629 P.2d 927, 929 (Wash. Ct. App. 1981). 42 MICROSOFT CORP. V. MOTOROLA, INC. filed infringement actions to facilitate that strategy by preventing Microsoft from using its patents—and therefore from implementing the 802.11 and H.264 standards—until it obtained a license at a rate significantly higher than the RAND rate. The timing of the injunctive actions was also indicative of bad faith. In opening arguments, Microsoft’s counsel suggested that because the injunctions were sought immediately after the twenty-day acceptance window provided in the offer letters expired, the offers were no more than “a prelude to allow Motorola to be able to say, ‘We’ve made an offer. They didn’t accept it. Now we can sue.’” Motorola’s injunction suits were also brought after Microsoft filed its breach of contract lawsuit with the district court. At that point, Motorola was aware that the present lawsuit could establish RAND rates. “A patentee subject to FRAND commitments may have difficulty establishing irreparable harm.” Apple, Inc., 757 F.3d at 1332; see also Microsoft I, 696 F.3d at 877. Here, had Motorola accepted the RAND rates, it would then be fully compensated for Microsoft’s infringing use. The jury could have inferred, from that circumstance, that the injunctive actions were not motivated by a fear of irreparable harm, as payment of the RAND rate would eliminate any such harm. In the absence of a fear of irreparable harm as a motive for seeking an injunction, the jury could have inferred that the real motivation was to induce Microsoft to agree to a license at a higher-than-RAND rate. Finally, as discussed at more length in Part II.E.2, infra, there was evidence of Motorola’s knowledge that pursuing an MICROSOFT CORP. V. MOTOROLA, INC. 43 injunctive action could breach its duty of good faith and fair dealing. In May 2012, Microsoft expressed concern to the FTC about Motorola’s conduct concerning its RAND obligations. Shortly thereafter, the FTC initiated an investigation into whether Motorola and Google had “reneged on a licensing commitment made to several standard-setting bodies to license its standards-essential patents relating to smartphones, tablet computers and video game systems on FRAND terms by seeking injunctions against willing licensees of . . . SEPs.” The investigation ultimately resulted in a consent decree. Around the same time, the FTC contacted the ITC, before whom Motorola’s action for an exclusion order was pending, expressing concern that allowing an SEP holder to obtain an exclusion order against a license-seeker was “inconsistent with the RAND commitment.” So Motorola was aware the FTC found its conduct questionable, yet left its injunctive suits in place. This sequence provided some evidence that Motorola acted in bad faith. The evidence just summarized, discretely and taken as a whole, is susceptible to contrary interpretations as well. But it was for the jurors to assess witness credibility, weigh the evidence, and make reasonable inferences. See United States v. Sanchez-Lima, 161 F.3d 545, 548 (9th Cir. 1998). The record provides a substantial basis on which the jury could have based a verdict favoring Microsoft. See MCH Fin. Ltd. P’ship, 714 F.3d at 1131–32.