This article is the second in a series on a rapidly-evolving area of patent law: determining the “reasonable and non-discriminatory” (RAND) royalty rate for licensing a standard-essential U.S. patent. Part 1 identified the key issues and underlying policy in setting the RAND royalty rate.
The first case in the United States to set the F/RAND patent royalty was Microsoft Corp. v. Motorola, Inc., in the Western District of Washington. There, Microsoft brought an action in 2010 for declaratory judgment that Microsoft was a third-party beneficiary of Motorola’s RAND commitments to the IEEE and ITU for two groups of SEPs, and Motorola breached its contractual obligation to license those patents to Microsoft on RAND terms. The court determined as an initial matter in 2012 that Microsoft was a third-party beneficiary and therefore able to enforce the RAND promises that Motorola made. The parties agreed that the asserted claims were standard-essential, leaving the determination of the RAND royalty rate, and a RAND royalty range, within which RAND offers must lie or be presumptively non-RAND.