Court Opinion

ID: 3065937
Source: CourtListenerOpinion
Date Created: 2015-10-14 22:49:23.862717+00
Date Added: 2024-06-11T11:43:03.575940
License: Public Domain

FOR PUBLICATION
  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

MICROSOFT CORPORATION, a                
Washington corporation,
                  Plaintiff-Appellee,          No. 12-35352
                 v.
                                                D.C. No.
                                            2:10-cv-01823-JLR
MOTOROLA, INC.; MOTOROLA
MOBILITY, INC.; GENERAL                         OPINION
INSTRUMENT CORPORATION,
            Defendants-Appellants.
                                        
        Appeal from the United States District Court
           for the Western District of Washington
         James L. Robart, District Judge, Presiding

                 Argued and Submitted
      September 11, 2012—San Francisco, California

                  Filed September 28, 2012

     Before: J. Clifford Wallace, Sidney R. Thomas, and
              Marsha S. Berzon, Circuit Judges.

                  Opinion by Judge Berzon

                            12089
12092              MICROSOFT v. MOTOROLA

                         COUNSEL

Derek L. Shaffer, Quinn Emanuel Urquhart & Sullivan, LLP,
Washington D.C.; Kathleen M. Sullivan, Quinn Emanuel
Urquhart & Sullivan, LLP, New York, New York, for the
appellants.

Arthur W. Harrigan, Jr., Christopher Wion, Shane P. Cramer,
Danielson Harrigan Leyh & Tollefson LLP, Seattle, Washing-
ton; David T. Pritikin, Constantine L. Treta, Jr., Richard A.
Cederoth, Robert N. Hochman, Nathaniel C. Love, Sidley
Austin LLP, Chicago, Illinois; Carter G. Phillips, Sidley Aus-
tin LLP, Washington, D.C.; T. Andrew Culbert, David E. Kil-
lough, Microsoft Corporation, Redmond, Washington, for the
appellee.

                         OPINION

BERZON, Circuit Judge:

   In this interlocutory appeal, Motorola appeals from the dis-
trict court’s preliminary injunction to enjoin Motorola tempo-
rarily from enforcing a patent injunction that it obtained
against Microsoft in Germany. We review the district court’s
                    MICROSOFT v. MOTOROLA                  12093
grant of a foreign anti-suit injunction under the deferential
abuse-of-discretion standard, and affirm.

                    I.   BACKGROUND

  The parties are involved in ongoing contract and patent liti-
gation before the district court. We recite here only the factual
and procedural history most relevant to this interlocutory
appeal.

  A.   Standard-setting organizations and intellectual
       property law

   The underlying case before the district court concerns how
to interpret and enforce patent-holders’ commitments to
industry standard-setting organizations (“SSOs”), which
establish technical specifications to ensure that products from
different manufacturers are compatible with each other. See
generally Mark A. Lemley, Intellectual Property Rights and
Standard-Setting Organizations, 90 Calif. L. Rev. 1889
(2002). Specifically, the case involves the H.264 video coding
standard set by International Telecommunications Union
(“ITU”), and the 802.11 wireless local area network standard
set by the Institute of Electrical and Electronics Engineers
(“IEEE”). This appeal implicates primarily the H.264 stan-
dard.

   Standards provide many benefits for technology consum-
ers, including not just interoperability but also lower product
costs and increased price competition. See Apple, Inc. v.
Motorola Mobility, Inc., 2011 WL 7324582, at *1 (W.D. Wis.
June 7, 2011). The catch with standards “is that it may be nec-
essary to use patented technology in order to practice them.”
Id. As a result, standards threaten to endow holders of
standard-essential patents with disproportionate market
power. In theory, once a standard has gained such widespread
acceptance that compliance is effectively required to compete
in a particular market, anyone holding a standard-essential
12094                 MICROSOFT v. MOTOROLA
patent could extract unreasonably high royalties from suppli-
ers of standard-compliant products and services. This problem
is a form of “patent holdup.” See generally Mark A. Lemley,
Ten Things to Do About Patent Holdup of Standards (And
One Not To), 48 B.C. L. Rev. 149 (2007).

   Many SSOs try to mitigate the threat of patent holdup by
requiring members who hold IP rights in standard-essential
patents to agree to license those patents to all comers on terms
that are “reasonable and nondiscriminatory,” or “RAND.” See
Lemley, Intellectual Property Rights, 90 Calif. L. Rev. at
1902, 1906. For example, consider the ITU, whose H.264
standard is implicated in this appeal. The ITU’s Common
Patent Policy (the “ITU Policy”) provides that “a patent
embodied fully or partly in a [standard] must be accessible to
everybody without undue constraints.” Anyone who owns a
patent declared essential to an ITU standard must submit a
declaration to the ITU stating whether it is willing to “negoti-
ate licenses with other parties on a non-discriminatory basis
on reasonable terms and conditions.” If a “patent holder is not
willing to comply” with the requirement to negotiate licenses
with all seekers, then the standard “shall not include provi-
sions depending on the patent.”

  Pursuant to these procedural requirements, Motorola has
submitted numerous declarations to the ITU stating that it will
grant licenses on RAND terms for its H.264-essential patents.
A typical such declaration provides:

     The Patent Holder will grant a license to an unre-
     stricted number of applicants on a worldwide, non-
     discriminatory basis and on reasonable terms and
     conditions to use the patented material necessary in
     order to manufacture, use, and/or sell implementa-
     tions of the above ITU-T Recommendation |
     ISOC/IEC International Standard.1
   1
     The ITU’s policy documents use the term “recommendation” rather
than “standard.” “ISOC/IEC” refers to the International Organisation for
Standardization and the International Electrotechnical Commission, with
which the ITU jointly developed the H.264 standard.
                    MICROSOFT v. MOTOROLA                  12095
   The ITU Policy does not specify how to determine RAND
terms, or how courts should adjudicate disputes between
patent-holders and would-be licensors under a RAND com-
mitment. To the contrary, the ITU Policy includes the follow-
ing disclaimer:

    [Standards] are drawn up by technical and not patent
    experts; thus, they may not necessarily be very
    familiar with the complex international legal situa-
    tion of intellectual property rights such as patents,
    etc. . . .

    ....

    . . . The detailed arrangements arising from patents
    (licensing, royalties, etc.) are left to the parties con-
    cerned, as these arrangements might differ from case
    to case.

The ITU Policy also disclaims any role for the organization
in negotiating licenses or in “settling disputes on Patents,”
stating, “this should be left — as in the past — to the parties
concerned.” Finally, the ITU form that patent-holders use to
submit licensing declarations includes the caveat: “This decla-
ration does not represent an actual grant of a license.”

   Courts and commentators are divided as to how, if at all,
RAND licensing disputes should be settled. Relatedly, some
commentators have suggested that because of the RAND
licensing commitment, injunctive relief is an inappropriate
remedy for infringement of standard-essential patents. See,
e.g., Lemley, Ten Things, 48 B.C. L. Rev. at 167 (“Denying
[injunctive] relief is the most powerful way to prevent patent
holdup[.]”). Judge Posner, sitting by designation on the U.S.
District Court for the Northern District of Illinois, recently
held in a different case involving Motorola-owned standard-
essential patents for which Motorola had made a RAND com-
mitment that the court would not
12096                 MICROSOFT v. MOTOROLA
      be justified in enjoining Apple [the plaintiff in that
      case] from infringing [the patent at issue] unless
      Apple refuses to pay a royalty that meets the
      FRAND requirement.2 By committing to license its
      patents on FRAND terms, Motorola committed to
      license the [patent] to anyone willing to pay a
      FRAND royalty and thus implicitly acknowledged
      that a royalty is adequate compensation for a license
      to use that patent.

Apple, Inc. v. Motorola, Inc., ___ F. Supp. 2d ___, 2012 WL
2376664 (N.D. Ill. June 22, 2012), at *12 (Posner, J.). More
generally, Justice Kennedy has suggested that injunctions
against patent infringement “may not serve the public inter-
est” in cases where “the patented invention is but a small
component of the product the companies seek to produce and
the threat of an injunction is employed simply for undue
leverage in negotiations.” eBay Inc. v. MercExchange, L.L.C.,
547 U.S. 388, 396-97 (2006) (Kennedy, J., concurring).

  B.    The U.S. contract litigation

   In October 2010, Motorola sent Microsoft two letters offer-
ing to license certain of its standard-essential patents. Of rele-
vance to this appeal is the H.264 letter, sent on October 29,
2010. The letter proposed a royalty of “2.25% per unit” for
each standard-compliant product, “subject to a grant back
license” of Microsoft’s standard-essential patents, “based on
the price of the end product (e.g., each Xbox 360 product,
each PC/laptop, each smartphone, etc.) and not on component
software (e.g., Xbox 360 system software, Windows 7 soft-
ware, Windows Phone 7 software, etc.).” It noted in closing:
“Motorola will leave this offer open for 20 days. Please con-
firm whether Microsoft accepts the offer.”
  2
   Instead of RAND, some courts and commentators use the alternative,
legally equivalent abbreviation “FRAND,” for “fair, reasonable, and non-
discriminatory rates.”
                        MICROSOFT v. MOTOROLA                          12097
   Appended to the letter was a “non-exhaustive list” of the
U.S. and international patents that Motorola declares that it
owns and that are essential to the H.264 standard, and that
would be “included in the license” being offered. The list
comprised not just U.S. patents but also numerous patents
granted or filed in foreign jurisdictions, including Australia,
Canada, China, the European Patent Convention,3 France,
Germany, Great Britain, Ireland, Japan, Korea, Mexico, the
Netherlands, Norway, South Korea, Sweden, and Taiwan.
Among these were German patents numbered EP0538667
(“’667”) and EP0615384 (“’384”), and U.S. patents 7,310,374
(“’374”); 7,310,375 (“’375”); and 7,310,376 (“’376”).4

   On November 9, 2010, Microsoft filed a breach-of-contract
suit against Motorola in the U.S. District Court for the West-
ern District of Washington, under Washington state contract
law.5 Microsoft’s theory of liability is that Motorola’s pro-
posed royalty terms were unreasonable, and that Motorola’s
letters therefore breached its contractual RAND obligations to
the IEEE and the ITU, to which Microsoft is a third-party
beneficiary. The next day, Motorola filed a patent suit against
Microsoft in the U.S. District Court for the Western District
of Wisconsin, alleging infringement of U.S. patents ’374,
’375, and ’376. The Western District of Wisconsin transferred
the patent case to the Western District of Washington, where,
   3
     The European Patent Convention allows applicants to file patent appli-
cations with the European Patent Office (“EPO”), designating for which
contracting states the patent is sought. If the EPO grants a European
patent, the grant does not result in a single, transnational patent, but rather
creates an independent, nationally-enforceable patent within each of the
designated states, with “the effect of and . . . subject to the same condi-
tions as a national patent granted by that State, unless this Convention pro-
vides otherwise.” European Patent Convention art. 2, Oct. 5, 1973.
Infringement claims, for instance, must be litigated independently within
each country under each country’s patent law. See id. art. 64(3).
   4
     The prefix “EP” denotes that these are European patents.
   5
     Microsoft’s amended complaint of February 23, 2011, is the currently
operative complaint.
12098                    MICROSOFT v. MOTOROLA
in June 2011, the district court ruled that Motorola’s patent
claims were not compulsory counterclaims to Microsoft’s
contract claims. Nevertheless, the court consolidated the two
cases in the interest of judicial economy.

   In February 2012, the district court granted partial sum-
mary judgment for Microsoft on its contract claims, finding
that:

       (1) Motorola entered into binding contractual com-
       mitments with the IEEE and the ITU, committing to
       license its declared-essential patents on RAND terms
       and conditions; and (2) that Microsoft is a third-party
       beneficiary of Motorola’s commitments to the IEEE
       and the ITU.

The district court noted that, at a status conference earlier in
February 2012, “Motorola stated on the record that it did not
dispute that it entered into the aforementioned binding con-
tractual commitments with the IEEE and the ITU and that
Microsoft is a third-party beneficiary of these commitments.”6
  6
   The transcript of the status conference states, in relevant part:
         THE COURT: Is the first part of that sentence also accurate,
      that you entered into binding contractual commitments with IEEE
      and ITU, committing those to that RAND process?
        [COUNSEL]: Well, yeah, that is really what the issue is, your
      Honor, in terms of what the assurance is. The assurance is that
      we would — that Motorola agreed to license those standard
      essential patents on RAND terms.
         THE COURT: All I am asking is — I think you just agreed
      with me. I am not asking you if you did it or not, I am just asking
      you if that’s what you are supposed to do. I think the answer to
      that is yes.
         [COUNSEL]: Yes. Enter into a license on RAND terms, that’s
      right.
         THE COURT: The second point that Microsoft asked the court
      to declare is, and I will quote, “Microsoft is a third-party benefi-
                       MICROSOFT v. MOTOROLA                        12099
   The district court denied Microsoft’s motion for summary
judgment as to whether Motorola must offer RAND terms in
its initial offer letters (or whether only the ultimate license
must be RAND, which is Motorola’s position), and as to
whether Motorola’s letters offering to license its H.264 and
802.11 standard-essential patents breached Motorola’s RAND
obligations. These remaining two issues are scheduled to be
tried to the bench in November 2012.

  C.    The German patent litigation

   In July 2011, several months into the above-described
domestic litigation, Motorola sued Microsoft in the
Landgericht Mannheim, or Mannheim Regional Court, alleg-
ing infringement of the German ’667 and ’384 patents.7 In the
German suit, Motorola sought, among other relief, an injunc-
tion prohibiting Microsoft from selling allegedly infringing
products in Germany, including the Microsoft Xbox gaming
system and certain Microsoft Windows software.

  On May 2, 2012, the Mannheim Court issued its ruling.
First, the court held that Microsoft did not have a license to
use Motorola’s patents. Second, it rejected the argument that
Motorola’s RAND commitment to the ITU created a contract
enforceable by Microsoft, because German law does not rec-

    ciary of Motorola’s commitments to the SSOs.” Once again, let’s
    stay away from the precise terms that were offered and asked as
    a conceptual matter. I think there is also no disagreement on that.
    [Counsel], am I correct on that?
       [COUNSEL]: Your Honor, that is correct, we would agree that
     Microsoft can fairly claim to be the third-party beneficiary of the
     assurance.
  7
    The plaintiff in the German suit is General Instrument Corporation, a
defendant in this case and a subsidiary of the Motorola Group. The defen-
dants in the German suit are Microsoft Corporation, the plaintiff in this
case, as well as Microsoft Deutschland GmbH and Microsoft Ireland
Operations Ltd.
12100                   MICROSOFT v. MOTOROLA
ognize third-party contractual rights. Finally, the German
court held that Microsoft had infringed the ’667 and ’384 pat-
ents, and enjoined Microsoft from “offering, marketing, using
or importing or possessing . . . in the territory of the Federal
Republic of Germany decoder apparatus (in particular Xbox
360)”; from “offering and/or supplying in the territory of the
Federal Republic of Germany computer software (in particu-
lar Windows 7 and/or Internet Explorer 9)”; and “from offer-
ing and/or supplying in the territory of the Federal Republic
of Germany computer software (in particular Windows Media
Player 12).” The German court rejected the argument that a
RAND commitment operates as a “waiver of claims for
injunctive relief.”8

   The German injunction is not self-enforcing. According to
an expert declaration on German law submitted by Motorola
to the district court, to enforce the German patent injunction,
Motorola would have to post a security bond covering poten-
tial damages to Microsoft should the infringement ruling be
reversed on appeal. Microsoft could then file a motion with
the German appellate court to stay the injunction, which
motion “would be granted if there is a reasonable likelihood
of success for the appeal and if enforcement pending appeal
would cause significant harm.”

   According to the same expert, Microsoft could alternatively
avoid enforcement of the injunction pending appeal by fol-
lowing what is known in German law as “the Orange Book
procedure,” after the German Supreme Court opinion that
introduced it. Under this procedure, Microsoft would have to
make “an unconditional offer to conclude a license agree-
ment” with Motorola. Microsoft could include in its offer
either a specific proposed royalty rate, or “a provision accord-
  8
    We quote from the preliminary translations of the German court order
provided by the parties to the district court. Although each party submitted
its own translation, they do not differ substantially. This quote comes from
the translation provided by Microsoft.
                    MICROSOFT v. MOTOROLA                  12101
ing to which the patent holder shall determine the appropriate
royalty rate at its fair discretion,” subject to German judicial
review.

  D.   The anti-suit injunction

   While the parties were awaiting the German court’s deci-
sion, Microsoft asked Motorola (through an email exchange
between their lawyers) to “agree that it would not seek
enforcement of a German injunction pending a ruling on the
RAND related issues by Judge Robart,” and “offered to post
a bond of $300 million” against any possible injury to
Motorola. Absent such an agreement, Microsoft said, it would
ask the district court to enjoin Motorola from enforcing any
German injunction that it might obtain. Motorola responded
with “surprise[ ] that Microsoft would ask a United States
District Court to rule on the propriety of a remedy in Germa-
ny,” particularly given the availability of the Orange Book
procedure.

   On March 28, 2012, Microsoft moved the district court for
a temporary restraining order (“TRO”) and preliminary
injunction to enjoin Motorola from enforcing any German
injunctive relief it might obtain. On April 12, 2012, after oral
argument on the motion, the district court granted Microsoft’s
motion for a TRO, requiring Microsoft to post a $100 million
security bond as collateral for any damages to Motorola. It
was after that, on May 2, that the Mannheim Court issued its
ruling.

   On May 14, 2012, the district court converted the TRO into
the preliminary injunction at issue in this interlocutory appeal.
The preliminary injunction bars Motorola from “enforcing
any injunctive relief it may receive in the German Action with
respect to the European Patents at issue therein,” and “shall
remain in effect until [the district court] is able to determine
whether injunctive relief is an appropriate remedy for
12102                MICROSOFT v. MOTOROLA
Motorola to seek with respect to Microsoft’s alleged infringe-
ment of Motorola’s standard essential patents.”

   The district court explained its rationale for granting the
injunction as follows. First, the district court concluded that
the pending contract action before it would be dispositive of
the German patent action, “because the European Patents at
issue in the German Action were included in Motorola’s
October 29 Letter offering a worldwide license for Motorola’s
H.264 Standard-essential patents, and because Motorola con-
tracted with the ITU to license the European Patents on
RAND terms to all applicants on a worldwide basis.” Second,
the court determined that the German action raised “concerns
against inconsistent judgments,” and that “the timing of the
filing of the German Action raises concerns of forum shop-
ping and duplicative and vexatious litigation,” particularly
since “Motorola’s commitments to the ITU involved approxi-
mately 100 Motorola-owned patents, yet Motorola invoked
the German Action implicating only two . . . of these patents
and sought injunctive relief in Germany before [the district
court] could adjudicate that precise issue.” “In sum,” the dis-
trict court concluded, “Motorola’s actions have frustrated [the
district court’s] ability to adjudicate issues properly before it,”
i.e., the propriety of injunctive relief in the RAND context.

   Finally, the district court reasoned that the injunction’s
“impact on comity would be tolerable,” Applied Med. Distrib.
Corp. v. Surgical Co., 587 F.3d 909, 919 (9th Cir. 2009)
(internal quotation marks and citation omitted), because the
German action was filed after the U.S. action; the “anti-suit
injunction is limited in scope to enjoining Motorola from
enforcing any injunctive relief that it may receive in the Ger-
man Action,” but does not otherwise affect Motorola’s ability
to pursue its German patent claims against Microsoft; and
“[the district court] has [a] strong interest in adjudicating the
claims before it,” as both parties are U.S. corporations and the
facts at issue in the contract dispute took place within the
United States.
                    MICROSOFT v. MOTOROLA                 12103
   On May 16, 2012, Motorola filed a timely notice of appeal
from the preliminary injunction in this court.

                    II.   JURISDICTION

   “Not all cases involving a patent-law claim fall within the
Federal Circuit’s jurisdiction.” Holmes Group, Inc. v.
Vornado Air Circulation Sys., Inc., 535 U.S. 826, 834 (2002).
The Federal Circuit has jurisdiction over an interlocutory
appeal only if it would have jurisdiction over a final appeal
in the case under 28 U.S.C. § 1295. 28 U.S.C. § 1292(c)(1).
Microsoft’s complaint sounds in contract and invokes the dis-
trict court’s diversity jurisdiction under 28 U.S.C. § 1332. We
therefore have jurisdiction over this interlocutory appeal
under 28 U.S.C. § 1292(a)(1).

             III.   STANDARD OF REVIEW

   We review a district court’s foreign anti-suit injunction for
abuse of discretion. See Applied Med., 587 F.3d at 913. We
review the district court’s factual findings in connection with
the injunction for clear error, and its legal interpretations de
novo. See id. “When a district court makes an error of law, it
is an abuse of discretion.” Id.

   Abuse-of-discretion review is highly deferential to the dis-
trict court. See United States v. Hinkson, 585 F.3d 1247,
1261-62 (9th Cir. 2009) (en banc). Under this standard of
review, we must “uphold a district court determination that
falls within a broad range of permissible conclusions in the
absence of an erroneous application of law.” Grant v. City of
Long Beach, 315 F.3d 1081, 1091 (9th Cir. 2002), amended
by 334 F.3d 795 (9th Cir. 2003) (order). We reverse “only
when” we are “convinced firmly that the reviewed decision
lies beyond the pale of reasonable justification under the cir-
cumstances.” Harman v. Apfel, 211 F.3d 1172, 1175 (9th Cir.
2000).
12104               MICROSOFT v. MOTOROLA
                       IV.   ANALYSIS

   [1] “ ‘A federal district court with jurisdiction over the par-
ties has the power to enjoin them from proceeding with an
action in the courts of a foreign country, although the power
should be used sparingly.’ ” E. & J. Gallo Winery v. Andina
Licores S.A., 446 F.3d 984, 989 (9th Cir. 2006) (quoting Seat-
tle Totems Hockey Club, Inc. v. Nat’l Hockey League, 652
F.2d 852, 855 (9th Cir. 1981)).

   We clarified our framework for evaluating a foreign anti-
suit injunction in Gallo, 446 F.3d 984, and elaborated upon
that framework in Applied Medical, 587 F.3d 909. Together,
these cases establish a three-part inquiry for assessing the pro-
priety of such an injunction. First, we determine “whether or
not the parties and the issues are the same” in both the domes-
tic and foreign actions, “and whether or not the first action is
dispositive of the action to be enjoined.” Gallo, 446 F.3d at
991 (citations omitted). Second, we determine whether at least
one of the so-called “Unterweser factors” applies. See id.
Finally, we assess whether the injunction’s “impact on comity
is tolerable.” Id.

   The Unterweser factors are a disjunctive list of consider-
ations that may justify a foreign anti-suit injunction, first
articulated by the Fifth Circuit in In re Unterweser Reederei
GMBH, 428 F.2d 888, 896 (5th Cir. 1970), aff’d on reh’g, 446
F.2d 907 (5th Cir. 1971) (en banc) (per curiam), rev’d on
other grounds sub nom. M/S Bremen v. Zapata Off-Shore Co.,
407 U.S. 1 (1972), and adopted by this court as instructive in
Seattle Totems, 652 F.2d at 855. The full list of Unterweser
factors is as follows:

    [whether the] foreign litigation . . . would (1) frus-
    trate a policy of the forum issuing the injunction; (2)
    be vexatious or oppressive; (3) threaten the issuing
    court’s in rem or quasi in rem jurisdiction; or (4)
                        MICROSOFT v. MOTOROLA                        12105
      where the proceedings prejudice other equitable con-
      siderations.

Gallo, 446 F.3d at 990 (quoting Seattle Totems, 652 F.2d at
855).9

   In determining whether to issue Microsoft’s requested anti-
suit injunction, the district court applied the three-step Gallo
framework, and therefore “identified the correct legal stan-
dard for decision of the issue before it.” Hinkson, 585 F.3d at
1251. Under the abuse-of-discretion standard of review, we
next consider whether, in applying that framework, “the dis-
trict court’s findings of fact, and its application of those find-
ings of fact to the correct legal standard, were illogical,
implausible, or without support in inferences that may be
drawn from facts in the record.” Id.

  A.    The parties and issues are the same in both actions

   [2] The threshold consideration for a foreign anti-suit
injunction is “whether or not the parties and the issues are the
same” in both the domestic and foreign actions, “and whether
or not the first action is dispositive of the action to be
enjoined.” Gallo, 446 F.3d at 991 (citations omitted); accord
Quaak v. Klynveld Peat Marwick Goerdeler Bedrijfsrevi-
soren, 361 F.3d 11, 18 (1st Cir. 2004) (“The gatekeeping
  9
    In Applied Medical, we more narrowly described the second Gallo step
as an inquiry into “whether the foreign litigation would ‘frustrate a policy
of the forum issuing the injunction,’ ” 587 F.3d at 913 (quoting Gallo, 446
F.3d at 991); in other words, we referenced solely the first of the Unter-
weser factors. But there is no indication that Applied Medical meant, in so
doing, to narrow the Gallo inquiry. Rather, in both Gallo and Applied
Medical, such a focus made sense because the contracts at issue included
forum-selection clauses, and the specific rationale for the anti-suit injunc-
tion in each case was to protect the strong U.S. public policy of enforcing
forum-selection clauses. Still, Gallo itself is clear that the list of Unter-
weser factors is disjunctive, and that “any of the Unterweser factors” may
justify a foreign anti-suit injunction, not just the first. 446 F.3d at 991
(emphasis added).
12106               MICROSOFT v. MOTOROLA
inquiry is, of course, whether parallel suits involve the same
parties and issues.”); Paramedics Electromedicina Comercial,
Ltda. v. GE Med. Sys. Info. Tech., Inc., 369 F.3d 645, 652 (2d
Cir. 2004).

   Conducting this threshold inquiry in Applied Medical with
reference to a contract containing a forum-selection clause,
we clarified that

    whether the issues are the same and the first action
    dispositive of the action to be enjoined are interre-
    lated requirements; that is, to the extent the domestic
    action is capable of disposing of all the issues in the
    foreign action and all the issues in the foreign action
    fall under the forum selection clause, the issues are
    meaningfully “the same.”

587 F.3d at 915. Although the contract at issue in this case
does not contain a forum-selection clause, we are nevertheless
informed by Applied Medical’s emphasis on the functional
character of the threshold similarity-of-issues inquiry. We ask
“whether the issues are the same” not in a technical or formal
sense, but “in the sense that all the issues in the foreign action
. . . can be resolved in the local action.” Id. The issues need
not be “precisely and verbally identical,” as “the verbal form
of laws in different countries will inevitably differ.” Id.

  [3] Here, all agree that the parties are the same in both the
U.S. and German actions. As to whether the issues are the
same in the sense that all the issues in the German patent
action can be resolved in the U.S. contract action, Motorola
argues that the U.S. action cannot resolve the German action,
because patent law is uniquely territorial and patents have no
extraterritorial effect.

  To be sure, if the district court had based its injunction in
an expectation that U.S. patent claims could dispose of Ger-
man patent claims, then it would have erred. See Stein
                    MICROSOFT v. MOTOROLA                  12107
Assocs., Inc. v. Heat & Control, Inc., 748 F.2d 653, 658 (Fed.
Cir. 1984) (upholding denial of foreign anti-suit injunction
against enforcement of British patents corresponding to U.S.
patents-in-suit, holding that “resolution of the domestic action
will not dispose of the British action” because “[o]nly a
British court, applying British law, can determine validity and
infringement of British patents”); Canadian Filters (Harwich)
Ltd. v. Lear-Siegler, Inc., 412 F.2d 577, 579 (1st Cir. 1969)
(vacating injunction of Canadian patent proceedings and find-
ing that none of the exceptions to comity that might justify a
foreign anti-suit injunction applied “where the subject matter
of the foreign suit is a separate, independent foreign patent
right”); cf. Sperry Rand Corp. v. Sunbeam Corp., 285 F.2d
542, 544-45 (7th Cir. 1961) (rejecting argument that district
court could enjoin German trademark litigation).

   But the district court did not base its injunction on the pen-
dency of parallel patent proceedings. Rather, it is Microsoft’s
Washington state contract claims that the district court deter-
mined could resolve the German patent claims. Specifically,
the district court concluded that the pending domestic contract
action could resolve the issues in the German patent action
“because the European Patents at issue in the German Action
were included in Motorola’s October 29 Letter offering a
worldwide license for Motorola’s H.264 Standard-essential
patents, and because Motorola contracted with the ITU to
license the European Patents on RAND terms to all applicants
on a worldwide basis.”

   [4] The contractual umbrella over the patent claims in this
case brings it in line with Medtronic, Inc. v. Catalyst
Research Corp., 518 F. Supp. 946 (D. Minn. 1981), aff’d, 664
F.2d 660 (8th Cir. 1981). There, as here, the district court
enjoined a party from enforcing injunctive relief in foreign
patent-infringement actions, although unlike here, none of the
foreign fora had yet issued an injunction. The district court in
Medtronic correctly observed that “[w]here patents are the
issue, the subject matter is not the same” for foreign anti-suit
12108               MICROSOFT v. MOTOROLA
injunction purposes. Id. at 955 (citing Western Elec. Co., Inc.
v. Milgo Elec. Corp., 450 F. Supp. 835, 838 (S.D. Fla. 1978)).
But the court concluded that it could issue an anti-suit injunc-
tion against the enforcement of foreign patents where the pre-
cise issue before the U.S. court was not the patents
themselves, but “a contract between the parties” not to
enforce the patents. Id. In other words, the party was “not
seeking to enjoin [a party from litigating in] a foreign court
on the basis of a patent validity or infringement finding by a
United States court” but on the basis of a contract interpreta-
tion by a U.S. court. Id.

   Ordinarily, we do not assess at all the likelihood of success
on the merits in a case like this, because when a preliminary
injunction is also a foreign anti-suit injunction, the likelihood-
of-success aspect of the traditional preliminary injunction test
is replaced by the Gallo test. See Gallo, 446 F.3d at 990 (“To
the extent the traditional preliminary injunction test is appro-
priate, we only need address whether [the injunction seeker]
showed a significant likelihood of success on the merits. The
merits in this case, however, are about whether [the injunction
seeker] has demonstrated that the factors specific to an anti-
suit injunction weigh in favor of granting that injunction
here.” (alterations in original) (internal quotation marks, ellip-
ses, and citation omitted)). So in this case, a ballpark, tenta-
tive assessment of the merits of the contract dispute is
intrinsically bound up with the threshold anti-suit injunction
inquiry: If we concluded that the district court’s interpretation
of the RAND commitment as a contract enforceable by
Microsoft was fundamentally legally erroneous, then we
would have to conclude that it was an abuse of discretion for
the district court to rule that the U.S. contract action might
dispose of the German patent action. Here, however,
Motorola does not dispute that its RAND commitments cre-
ated a contract that Microsoft can enforce as a third-party ben-
eficiary, even if it disagrees with Microsoft over how to
interpret the terms of that contract.
                    MICROSOFT v. MOTOROLA                  12109
   [5] We emphasize that we do not (indeed, we may not)
decide whether the district court’s partial summary judgment,
or its determination that it would adjudicate a RAND rate,
was proper — if an appellate court is to review those determi-
nations, it will have to do so on a final, not an interlocutory,
appeal. But we do hold this much: The district court’s conclu-
sions that Motorola’s RAND declarations to the ITU created
a contract enforceable by Microsoft as a third-party benefi-
ciary (which Motorola concedes), and that this contract gov-
erns in some way what actions Motorola may take to enforce
its ITU standard-essential patents (including the patents at
issue in the German suit), were not legally erroneous.
Motorola, in its declarations to the ITU, promised to “grant a
license to an unrestricted number of applicants on a world-
wide, non-discriminatory basis and on reasonable terms and
conditions to use the patented material necessary” to practice
the ITU standards. This language admits of no limitations as
to who or how many applicants could receive a license
(“unrestricted number of applicants”) or as to which country’s
patents would be included (“worldwide,” “the patented mate-
rial necessary”). Implicit in such a sweeping promise is, at
least arguably, a guarantee that the patent-holder will not take
steps to keep would-be users from using the patented material,
such as seeking an injunction, but will instead proffer licenses
consistent with the commitment made. See Apple, 2012 WL
2376664 at *12.

   In particular, the face of the contract makes clear that it
encompasses not just U.S. patents, but all of Motorola’s
standard-essential patents worldwide. When that contract is
enforced by a U.S. court, the U.S. court is not enforcing Ger-
man patent law but, rather, the private law of the contract
between the parties. Although patents themselves are not
extraterritorial, there is no reason a party may not freely agree
to reservations or limitations on rights that it would have
under foreign patent law (or any other rights that it may have
under foreign law) in a contract enforceable in U.S. courts. By
way of comparison, whenever a party agrees to a forum-
12110               MICROSOFT v. MOTOROLA
selection clause, it relinquishes any benefits that it might
receive from statutory rights or favorable canons of contrac-
tual interpretation only available in other forums. That is the
party’s choice, and “[t]here are compelling reasons why a
freely negotiated private international agreement, unaffected
by fraud, undue influence, or overweening bargaining power,
. . . should be given full effect.” M/S Bremen, 407 U.S. at 12-
13.

   Here, there is no forum-selection clause, but the broader
principle applies: Courts should give effect to freely made
contractual agreements. Motorola made promises to the ITU
to license its standard-essential patents worldwide to all com-
ers. In exchange, it received the benefit of having its patents
implicated in the standards. Motorola could have withheld the
promise at the price of having the ITU avoid its patents when
setting standards, but chose not to.

   [6] In sum, whether or not the district court ultimately
determines that Motorola breached its contract with the ITU
(it may or may not have), it is clear that there is a contract,
that it is enforceable by Microsoft, and that it encompasses
not just U.S. patents but also the patents at issue in the Ger-
man suit. Moreover, even if Motorola did not breach its con-
tract, then, however the RAND rate is to be determined under
the ITU standards, injunctive relief against infringement is
arguably a remedy inconsistent with the licensing commit-
ment. That the licensing agreement is not itself a license
according to the ITU Policy does not detract from this conclu-
sion. The question is how the commitment to license is to be
enforced, not whether the commitment itself is a license.

   Motorola maintains that it is improper for the district court
to determine the prospective RAND rate (or retrospective roy-
alties consistent with the RAND rate), at least before good-
faith bargaining between the patentee and the prospective
licensee has failed to produce a rate. We do not at this junc-
ture decide whether that is true or not. Cf. Apple, 2012 WL
                     MICROSOFT v. MOTOROLA                   12111
2376664 at *11 (Posner, J.) (suggesting that district court
could determine RAND royalty by “start[ing] with what the
cost to the licensee would have been of obtaining, just before
the patented invention was declared essential to compliance
with the industry standard, a license for the function per-
formed by the patent”); id. at *12 (“Motorola agreed to
license its standards-essential patents on FRAND terms as a
quid pro quo for their being declared essential to the standard.
It does not claim to have conditioned agreement on prospec-
tive licensees’ making counteroffers in license negotiations.”
(citation omitted)). Whatever the appropriate method of deter-
mining the RAND licensing rate, it could well be that retro-
spective payment at the rate ultimately determined and a
determination of the future rate, not an injunction banning
sales while that rate is determined, is the only remedy consis-
tent with the contractual commitment to license users of ITU
standard-essential patents.

   [7] We conclude that the district court did not abuse its dis-
cretion in determining that Microsoft’s contract-based claims,
including its claim that the RAND commitment precludes
injunctive relief, would, if decided in favor of Microsoft,
determine the propriety of the enforcement by Motorola of the
injunctive relief obtained in Germany.

  B.   At least two Unterweser factors apply

    At the second Gallo step, we look to “whether the foreign
litigation would ‘frustrate a policy of the forum issuing the
injunction,’ ” Applied Med., 587 F.3d at 913 (quoting Gallo,
446 F.3d at 991), or whether any of the other Unterweser fac-
tors apply. See Gallo, 446 F.3d at 991.

    [8] In explaining its rationale for the injunction, the district
court made findings sufficient to establish at least two of the
Unterweser factors: that the foreign litigation is “ ‘vexatious
or oppressive,’ ” and that the foreign litigation “ ‘prejudice[s]
. . . equitable considerations.’ ” Gallo, 446 F.3d at 990 (quot-
12112               MICROSOFT v. MOTOROLA
ing Seattle Totems, 652 F.2d at 855); cf. id. at 989 (“Courts
derive the ability to enter an anti-suit injunction from their
equitable powers.”). Based on its interactions with the parties,
the district court found that “the timing of the filing of the
German Action raises concerns of forum shopping and dupli-
cative and vexatious litigation,” particularly since “Mo-
torola’s commitments to the ITU involved approximately 100
Motorola-owned patents, yet Motorola invoked the German
Action implicating only two . . . of these patents and sought
injunctive relief in Germany before this court could adjudicate
that precise issue,” i.e., the propriety of injunctive relief for
infringement of standard-essential patents. In other words, in
the district court’s view, Motorola’s German litigation was
“vexatious or oppressive” to Microsoft and interfered with
“equitable considerations” by compromising the court’s abil-
ity to reach a just result in the case before it free of external
pressure on Microsoft to enter into a “holdup” settlement
before the litigation is complete.

   [9] Motorola contends that the German litigation cannot be
described as “vexatious” because the German court ruled in
Motorola’s favor. But litigation may have some merit and still
be “vexatious,” which is defined as “without reasonable or
probable cause or excuse; harassing; annoying.” Black’s Law
Dictionary 1701 (9th ed. 2009). In the midst of litigation over
Motorola’s obligations under Washington state contract law
with respect to a portfolio of patents that includes the two
German patents, Motorola initiated separate proceedings in
Germany to enforce those two patents directly. The district
court interpreted this step as a procedural maneuver designed
to harass Microsoft with the threat of an injunction removing
its products from a significant European market and so to
interfere with the court’s ability to decide the contractual
questions already properly before it. Although the district
court’s interpretation of Motorola’s litigation decisions may
not be the only possible interpretation, it is not “illogical,
implausible, or without support from inferences that may be
drawn from facts in the record.” Hinkson, 585 F.3d at 1251.
                    MICROSOFT v. MOTOROLA                 12113
We therefore cannot hold that the district court abused its dis-
cretion at this stage of the Gallo analysis.

  C.   The injunction’s impact on comity is tolerable

  [10] Finally, we assess whether the injunction’s “impact on
comity is tolerable.” Gallo, 446 F.3d at 991.

   The particular phrasing is instructive. Gallo requires not
that we calculate the precise quantum of the injunction’s
interference with comity, but only that we estimate whether
any such interference is so great as to be intolerable. Such a
flexible, fact- and context-specific inquiry accords both with
the posture of deference to the district court that abuse-of-
discretion review requires generally, and with the resistance
of comity in particular to precise measurement. After all,
comity, as many courts have recognized, is “a complex and
elusive concept.” Laker Airways Ltd. v. Sabena, Belgian
World Airlines, 731 F.2d 909, 937 (D.C. Cir. 1984) (quoted
in Gallo, 446 F.3d at 995); see also Quaak, 361 F.3d at 18
(“[C]omity is an elusive concept.”). It “is neither a matter of
absolute obligation, on the one hand, nor of mere courtesy and
good will, upon the other.” Hilton v. Guyot, 159 U.S. 113,
163-64 (1895).

   Nevertheless, our cases, along with instructive authority
from other circuits, do provide some objective guidance as to
factors that may inform our comity inquiry in the anti-suit
injunction context. For instance, comity is less likely to be
threatened in the context of a private contractual dispute than
in a dispute implicating public international law or govern-
ment litigants. See Gallo, 446 F.3d at 994; Applied Med., 587
F.3d at 921. At one pole, where two parties have made a prior
contractual commitment to litigate disputes in a particular
forum, upholding that commitment by enjoining litigation in
some other forum is unlikely to implicate comity concerns at
all. See Applied Med., 587 F.3d at 921. At the other pole, if
(hypothetically speaking) the State Department represented to
12114               MICROSOFT v. MOTOROLA
the court that “the issuance of an injunction really would
throw a monkey wrench, however small, into the foreign rela-
tions of the United States,” Allendale Mut. Ins. Co. v. Bull
Data Sys., Inc., 10 F.3d 425, 431 (7th Cir. 1993) (Posner, J.),
then comity would presumably weigh quite heavily against an
anti-suit injunction. Between these two poles, courts must in
their discretion evaluate whether and to what extent interna-
tional comity would be impinged upon by an anti-suit injunc-
tion under the particular circumstances. The order in which
the domestic and foreign suits were filed, although not dispo-
sitive, may be relevant to this determination depending on the
particular circumstances. Compare Applied Med., 587 F.3d at
921 (where “subsequent filing” of foreign action “raises the
concern that [party] is attempting to evade the rightful author-
ity of the district court,” enjoining foreign action would not
“intolerably impact comity”), with Gallo, 446 F.3d at 994
(when parties have forum-selection clause, “one party’s filing
first in a different forum would not implicate comity at all”).

   The scope of the anti-suit injunction is another factor rele-
vant to the comity inquiry. In Laker Airways, which we have
recognized as a “seminal case[ ] on anti-suit injunctions,”
Gallo, 446 F.3d at 994, the D.C. Circuit explained: “Comity
teaches that the sweep of the injunction should be no broader
than necessary to avoid the harm on which the injunction is
predicated.” Laker Airways, 731 F.2d at 933 n.81. A useful
illustration of this teaching is provided by the Second Cir-
cuit’s opinion in Ibeto Petrochemical Indus. Ltd. v. M/T Bef-
fen, 475 F.3d 56 (2d Cir. 2007). In that case, the receiver of
an allegedly contaminated oil shipment from New Jersey to
Nigeria sued the shipper in Nigerian court, subsequently
demanded arbitration in London, and then filed an additional
suit against the shipper in U.S. district court. Id. at 59. The
U.S. district court found that the parties had an enforceable
contractual agreement to arbitrate any disputes in London,
and accordingly compelled arbitration, stayed the U.S. action
pending completion of the arbitration, and permanently
enjoined the litigation in Nigeria. Id. at 60-61. The Second
                    MICROSOFT v. MOTOROLA                  12115
Circuit concluded that an anti-suit injunction was appropriate
but that the district court’s generally worded, seemingly per-
manent injunction “cut[ ] much too broadly.” Id. at 65. Noting
that “principles of international comity and reciprocity require
a delicate touch in the issuance of anti-foreign suit injunc-
tions,” the Second Circuit remanded to the district court with
instructions to modify the injunction into a more tailored
order “directed specifically to the parties” and limited in time.
Id.

   [11] Applying these precepts to our case, we cannot con-
clude that the district court abused its discretion in determin-
ing that a foreign anti-suit injunction could issue. At bottom,
this case is a private dispute under Washington state contract
law, between two U.S. corporations; it does not raise any
“public international issue.” Gallo, 446 F.3d at 994. Motorola
only initiated the German litigation after Microsoft filed suit
in the United States. Moreover, the anti-suit injunction sweeps
“no broader than necessary,” Laker Airways, 731 F.2d at 933
n.81; it bars Motorola not from pursuing its German patent
claims against Microsoft altogether, but only from posting the
bond required to enforce the German injunction. Even that bar
could expire as soon as the district court has had an opportu-
nity to adjudicate the contractual issues before it.

   Motorola argues that the anti-suit injunction offends comity
intolerably because its German patent claims have merit under
German law, as evidenced by the Mannheim Court’s ruling in
Motorola’s favor and injunction against the sale of Microsoft
products, and because German courts, unlike some U.S.
courts and commentators, do not interpret the RAND commit-
ment to create a contract enforceable by third parties or to
foreclose injunctive relief. If Motorola is right that the two
German patents are essential to implementing the H.264
industry standard, then it is hardly surprising that the German
court found that Microsoft was using those patents in its
H.264-compliant products.
12116               MICROSOFT v. MOTOROLA
   German and U.S. courts may differ as to what legal conclu-
sions follow from that finding. But the mere fact that different
jurisdictions answer the same legal question differently does
not, without more, generate an intolerable comity problem. If
that were the case, then there could virtually never be a for-
eign anti-suit injunction: Parallel proceedings in different
jurisdictions would have to be permitted to proceed any time
the two jurisdictions had different rules of law, which is
almost always the case.

   Again our forum-selection cases prove instructive on this
point, even though this case does not involve a forum-
selection clause. In those cases, we have emphasized that an
anti-suit injunction in the service of “enforcing a contract”
between private parties does not “breach[ ] norms of comity,”
even if, absent that contract, one party might have enjoyed
different procedural or substantive advantages under another
country’s law. Gallo, 446 F.3d at 994; see also, e.g., Parame-
dics, 369 F.3d at 649-55 (upholding foreign anti-suit injunc-
tion against Brazilian litigation commenced after U.S. court
had ruled the parties’ dispute was subject to their arbitration
agreement and compelled arbitration, even though the Brazil-
ian suit alleged “a tort claim unique to Brazilian law” that the
party argued could not be arbitrated).

   In any event, we have never suggested that the propriety of
an anti-suit injunction turns upon the merits of the foreign suit
under foreign law. In Applied Medical, the object of a foreign
anti-suit injunction made a similar argument that its Belgian
action could not be enjoined consistent with comity, because
the action was initiated “in good faith and [was] founded on
legitimate Belgian law.” 587 F.3d at 921. We rejected this
argument. To be sure, in Gallo, we suggested that an anti-suit
injunction may be especially warranted to restrain a party
from “potentially fraudulent” foreign litigation. 446 F.3d at
993. But “we made clear in Gallo that demonstration of such
extreme facts was not necessary to conclude that an injunction
                    MICROSOFT v. MOTOROLA                  12117
would not have an intolerable impact on comity.” Applied
Med., 587 F.3d at 921 (construing Gallo).

   [12] Motorola further urges that the anti-suit injunction
must be overturned because it has disabled Motorola from
enforcing its German patents in the only forum in which they
can be enforced. This argument exaggerates the scope of the
injunction, which leaves Motorola free to continue litigating
its German patent claims against Microsoft as to damages or
other non-injunctive remedies to which it may be entitled.
Indeed, depending on the outcome of the district court litiga-
tion, Motorola may well ultimately be able to enforce the Ger-
man injunction too. It was Motorola that offered to license the
German patents to Microsoft in its October 29, 2010, letter,
confirming that those patents are implicated in its RAND con-
tractual agreement. If Motorola wishes to challenge the dis-
trict court’s interpretation of that agreement, it will have to do
so on final appeal, after this case is fully resolved. In the
meantime, we cannot say that the district court’s limited anti-
suit injunction to protect its ability to reach that final resolu-
tion enacts any intolerable incursion into Germany’s sover-
eignty.

   [13] However elusive it may be, comity is not, of course,
to be contemplated lightly. Foreign anti-suit injunctions
should not be issued routinely. But the record makes clear that
the district court gave thoughtful consideration to the impor-
tance of international comity and nevertheless determined that
under the unique circumstances of this case, an anti-suit
injunction was proper. Reviewing that determination for an
abuse of discretion, we cannot say that it rested upon an erro-
neous view of the law or a clearly erroneous view of the facts.
“At most, there are competing comity concerns, so it cannot
fairly be said” that the district court’s preliminary injunction
“would have an intolerable impact on comity.” Applied Med.,
587 F.3d at 921.
12118             MICROSOFT v. MOTOROLA
                   V.   CONCLUSION

  Under the unique circumstances of this case, the district
court’s narrowly tailored preliminary injunction was not an
abuse of discretion. We AFFIRM.