TCL Comm’n v. Ericsson: District Court Issues Comprehensive Decision Determining Worldwide FRAND Royalty Rates for Ericsson’s 2G, 3G and 4G Wireless Standard Essential Patent Portfolio

Sullivan & Cromwell LLP - December 29, 2017
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Earlier this week, the long-awaited decision in TCL Comm’n v. Ericsson, C.A. No. 14-CV-341 (C.D. Cal. December 21, 2017) was released to the public.  In his 115 page opinion, Judge Selna used both a “top-down” patent counting approach, and an analysis of Ericsson’s comparable licenses, to determine FRAND royalty rates for Ericsson’s portfolio of more than 100 patent families essential to one or more of the 2G, 3G or 4G wireless standards. For 4G-capable telephones and tablets (including multimode devices), the court declared the FRAND royalty to be 0.450% on sales in the United States, and 0.314% on sales in the rest of the world.  The corresponding FRAND rates for 3G were found to be 0.300% for U.S. sales, 0.264% for European sales, and 0.224% for sales in the rest of the world.  The court also ordered TCL to pay $16.5 million for unlicensed past sales.  Finally, the court declared that, while Ericsson’s prior offers to TCL were not FRAND, Ericsson had not negotiated in bad faith, and it refused to consider whether Ericsson had been obliged by its FRAND declarations to the relevant standard-setting organization to offer a FRAND rate at the start of its negotiations with TCL.