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United States District Court for the Central District of California
November 8, 2017, Decided; December 21, 2017, Filed
CASE NO: SACV 14-341 JVS(DFMx), ; CASE NO: CV 15-2370 JVS(DFMx)
NUNC PRO TUNC to MARCH 9, 2018
Amended Memorandum of Findings of Fact and Conclusions of Law
This case focuses on the licensing of patents in the telecommunications field affecting 2G, 3G, and 4G1 cellular technologies. As discussed below, TCL Communication Technology Holdings, Ltd., TCT Mobile Limited, and TCT Mobile (US) Inc. (collectively "TCL") manufacture and distribute cell phones on a world-wide scale. Telefonaktiebolaget LM Ericsson and Ericsson Inc. (collectively "Ericsson") hold an extensive portfolio of telecommunications patents. TCL seeks to license Ericsson's patents, but the parties cannot agree on terms.
There is a critical overlay to this dispute. Standards organizations have evolved with the development of technology. The adoption of standards facilitates the overall development of technology and provides a common base which allows many manufacturers' devices to perform reliably and interchangeably in a given telecommunications environment. The relevant standards organization here is [*7] the European Telecommunications Standards Institute, or "ETSI." The acceptance of a patent holder's patent into a standard is of great value to the patent holder, and enhances the monopoly which the patent holder has by virtue of his patent. The accepted patents are referred to as standard essential patents, or "SEPs." Anyone who wishes to manufacture in accordance with the standard must secure a license from the patent holder. However, in exchange for acceptance of a patent as part of a standard, the patent holder must agree to license that technology on fair reasonable and non-discriminatory terms, or "FRAND" terms.
The task of the Court here is three fold.2 The Court must determine whether Ericsson met its FRAND obligation, and then whether Ericsson's final offers before litigation, Offer A and Offer B, satisfy FRAND. If they are not, the Court must determine what terms are material to a FRAND license, and then supply the FRAND terms.3 (Docket No. 1055 at 3-5.) The Court is presented with two principal schemes for determining the proper royalty rate. TCL advocates a "top-down" approach which begins with an aggregate royalty for all patents encompassed in a standard, then determines [*8] a firm's portion of that aggregate. Ericsson turns to existing licenses which it has negotiated to determine the appropriate rates. Ericsson also offers an "ex ante," or ex-Standard, approach which seeks to measure in absolute terms the value which Ericsson's patents add to a product.4
The Court discusses the procedural and factual background of the dispute, considers the ETSI overlay, and then turns to the parties' competing royalty approaches.
Full case includes Shepard's, Headnotes, Legal Analytics from Lex Machina, and more.
2017 U.S. Dist. LEXIS 214003 *; 2018 WL 4488286
TCL COMMUNICATION TECHNOLOGY HOLDINGS, LTD., et al., Plaintiffs/Counterclaim-Defendants, v. TELEFONAKTIEBOLAGET LM ERICSSON, et al., Defendants/Counterclaim-Plaintiffs,ERICSSON INC., et al., Plaintiffs/Counterclaim-Defendants, v. TCL COMMUNICATION TECHNOLOGY HOLDINGS, LTD., et al., Defendants/Counterclaim-Plaintiffs.
Subsequent History: As Amended March 9, 2018.
Reprinted as amended at, Substituted opinion at Tcl Commun. Tech. Holdings v. Telefonaktiebolaget Lm, 2018 U.S. Dist. LEXIS 234535 (C.D. Cal., Mar. 9, 2018)
Prior History: TCL Commun. Tech. Holdings, Ltd. v. Telefonaktiebolaget LM Ericsson, 2016 U.S. Dist. LEXIS 185361 (C.D. Cal., Mar. 3, 2016)
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