Last week, the United States Court of Appeals for the Federal Circuit issued an opinion in TCL Communs. Tech. Holdings, Ltd. v. Telefonaktienbolaget LM Ericsson, Nos. 2018-1363, -1732 (Dec. 5, 2019), vacating in part the district court’s FRAND royalty rate calculation for “release payments” holding Telefonaktienbolaget LM Ericsson (Ericsson) was entitled to a jury trial on past damages.
Following over a decade of negotiations, TCL Communication Technology Holdings Ltd. (TCL) sued Ericsson in the Central District of California for access to Ericsson’s portfolio of standard-essential patents (SEPs) incorporated into 2G, 3G, and 4G mobile communications standards under “fair, reasonable and non-discriminatory” (FRAND) rates. Ericsson then filed patent infringement claims in the Eastern District of Texas. The actions were consolidated in the California court. While Ericsson acknowledged certain claims sought specific performance and were equitable in nature, Ericsson contended its damages claim for past patent infringement was legal in nature. The district court disagreed. Following a ten-day bench trial, the district court ordered (1) a prospective FRAND royalty rate for practicing each standard, and (2) a “release payment” FRAND rate for TCL’s past unlicensed sales. The district court dismissed the patent infringement claims as moot in light of the FRAND determinations. Ericsson appealed, arguing it had a Seventh Amendment right to a jury trial on the adjudication of the “release payment” term.
The Federal Circuit analyzed whether the release payment, as distinct from the prospective FRAND royalty rate, was legal or equitable in nature. The Court compared the statutory actions to 18th-century actions brought in the courts of England before the merger of the courts of law and equity, and examined the remedy sought. Ericsson argued the release payment was equivalent to standard patent infringement damages that are legal in nature. TCL argued the past damages represented restitution and specific performance for a contract, equitable in nature. The Court held the “release payment” was in substance compensatory relief for TCL’s past patent-infringing activity and, therefore, Ericsson was entitled to a jury trial on the calculation of the release payment amount. The case was remanded for further proceedings consistent with the opinion.