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Commonwealth Sci. & Indus. Research Organisation v. Cisco Sys.

United States Court of Appeals for the Federal Circuit

December 3, 2015, Decided

2015-1066

Opinion

 [***1528]  [*1297]   Prost, Chief Judge.

Following a bench trial on damages, the district court awarded Commonwealth Scientific and Industrial Research Organisation ("CSIRO") $16,243,067 for Cisco Systems, Inc.'s ("Cisco") infringement of CSIRO's U.S. Patent No. 5,487,069 ("'069 patent"). On appeal, Cisco challenges the district court's damages award. We conclude that the district court's methodology in this case—insofar as it relied on the parties' actual licensing discussions—is not contrary to damages law. However, we also hold that the district court erred in not accounting for the '069 patent's standard-essential status and in its reasons for discounting a relevant license agreement. [**3]  We therefore vacate the district court's judgment and remand for the district court to revise its damages award.

I. Background

CSIRO is the principal research arm of the Australian federal government and conducts research in countless scientific fields. One such field is wireless communications. In the early 1990s, CSIRO, among many other organizations, set out to devise faster and more reliable wireless local area network technology. CSIRO's research resulted in the '069 patent, which was filed on November 23, 1993, and issued to CSIRO on January 23, 1996. The '069 patent discloses techniques directed to solving issues from wireless signals reflecting off objects and interfering with each other, commonly referred to as the "multipath problem."

In 1997, the Institute of Electrical and Electronics Engineers ("IEEE") released the original 802.11 wireless standard,  [*1298]  which provides the specifications for products using the Wi-Fi brand. The first revision of 802.11, called 802.11a, was ratified in 1999, and it included the '069 patent's technology. In connection with 802.11a, CSIRO submitted a letter of assurance to the IEEE pledging to license the '069 patent on reasonable and non-discriminatory ("RAND") terms. The '069 patent is also essential [**4]  to various later iterations of 802.11 (802.11g, n, and ac). However, despite the IEEE's repeated requests to CSIRO that it submit a letter of assurance for the '069 patent for these revisions of 802.11, CSIRO refused to encumber the '069 patent with a RAND commitment for these revisions.

When the '069 patent issued in 1996—the early days of 802.11—a group of individuals involved in the '069 patent's research attempted to commercialize the technology. Along with David Skellern and Neil Weste, both professors at Macquarie University in Australia, Terry Percival, a CSIRO scientist and named inventor on the '069 patent, founded a company called Radiata, Inc. to sell wireless chips in at least the United States. Consequently, Radiata and CSIRO entered into a license agreement—the Technology License Agreement ("TLA")—for the '069 patent. Under the TLA, Radiata agreed to pay CSIRO tiered royalties for each chip sold according  [***1529]  to the following table:

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809 F.3d 1295 *; 2015 U.S. App. LEXIS 20942 **; 117 U.S.P.Q.2D (BNA) 1527 ***

COMMONWEALTH SCIENTIFIC AND INDUSTRIAL RESEARCH ORGANISATION, Plaintiff-Appellee v. CISCO SYSTEMS, INC., Defendant-Appellant

Subsequent History: US Supreme Court certiorari denied by Commonwealth Sci. v. Cisco Sys., Inc., 2016 U.S. LEXIS 4138 (U.S., June 27, 2016)

Prior History:  [**1] Appeal from the United States District Court for the Eastern District of Texas in No. 6:11-cv-00343-LED, Chief Judge Leonard Davis.

Commonwealth Sci. & Indus. Research Organisation v. Cisco Sys., 2014 U.S. Dist. LEXIS 107612 (E.D. Tex., July 23, 2014)

Disposition: VACATED AND REMANDED.

CORE TERMS

district court, royalty, patent, damages, license, negotiations, products, technology, factors, hypothetical, apportionment, infringement, reliable, smallest, salable, rates, patent-practicing, patentee, wireless, parties, award damages, royalty rate, standardization, apportion, reasons, terms, per unit, calculation, methodology, comparable

Civil Procedure, Trials, Bench Trials, Patent Law, Jurisdiction & Review, Standards of Review, Clearly Erroneous Review, Appeals, Evidence, Types of Evidence, Testimony, Expert Witnesses, Damages, Patentholder Losses, Reasonable Royalties, Admissibility, Remedies, Damages, Expert Witnesses, Daubert Standard, Standards of Review