Microsoft Corp. v. Motorola, Inc., No. 14-35393, 2015 WL 4568613 (9th Cir. July 30, 2015).
Last week, the Ninth Circuit handed Microsoft a victory against Motorola in a case that tempers hardball tactics to enforce patents on “standards-essential” technologies. A panel of three judges in San Francisco upheld a District Court’s ruling that technology standardization places a patent-holder under contractual obligation to offer licenses at reasonable and non-discriminatory (“RAND”) rates, which may be determined by a court if necessary.
Standards allow consumers to use certain technologies across multiple devices, even if they are produced by different manufacturers. For example, when a consumer purchases a computer from Microsoft, they know that it will be able to read file formats patented by other technology companies, such as PDF, JPEG, Flash, and Bluetooth. These formats are standards that have been accepted and propagated by standards-setting organizations (SSOs).
The theory is that everyone benefits from this arrangement: it adds value to the products of technology companies and offers compatible devices to consumers. Registering with an SSO is a step toward market ubiquity, but by doing so, the patent holder is usually required to offer licenses on RAND terms. This encourages competition by preventing the holder of a standards-essential patent from demanding exorbitant royalties for standards that reach market dominance.