Commonwealth Scientific & Industrial Research Organisation v. Cisco Systems, Inc.
809 F.3d 1295
Fed. Cir.2015Background
- CSIRO owns U.S. Patent No. 5,487,069 (the ’069 patent) covering techniques to mitigate wireless multipath; its technology was incorporated into 802.11a and later 802.11 revisions.
- CSIRO gave a RAND (reasonable and non-discriminatory) letter of assurance for 802.11a but refused RAND commitments for later 802.11 revisions; the patent is standard-essential to multiple 802.11 iterations.
- Radiata (founded by CSIRO-associated inventors) entered a Technology License Agreement (TLA) with CSIRO in 1998; Cisco later acquired Radiata, assumed the TLA, and paid ~ $900,000 in royalties until 2007.
- CSIRO made a public Rate Card offer in 2004 (per-unit rates $1.40–$1.90 at the lowest tier); informal discussions between Cisco and CSIRO produced an informal $0.90 per-unit suggestion by Cisco in 2005; no Rate Card licenses were executed.
- CSIRO sued Cisco for infringement in 2011; infringement and validity were stipulated, leaving only damages for a bench trial; the district court rejected both parties’ expert models and derived a $0.90–$1.90 per-unit range from the Rate Card and Cisco’s $0.90 suggestion, awarding $16,243,067.
- On appeal, the Federal Circuit affirmed that using parties’ actual licensing discussions as a starting point is permissible, but found legal errors in (1) failing to account for the patent’s standard-essential status and (2) improperly discounting the TLA; vacated and remanded for recalculation of damages.
Issues
| Issue | Plaintiff's Argument (CSIRO) | Defendant's Argument (Cisco) | Held |
|---|---|---|---|
| Proper apportionment / royalty base | Parties’ negotiated per-unit rates (Rate Card and Cisco’s $0.90) properly value the patent itself | Damages must start from the smallest salable patent-practicing unit (the wireless chip) | Court: Starting from end-product license discussions is permissible; apportionment satisfied because negotiations targeted the patent’s value rather than entire product value |
| Effect of standard-essential status | No separate adjustment needed because RAND commitments were limited historically | Must adjust Georgia-Pacific factors and royalty to remove value stemming from standard adoption (hold-up/standarization) | Court: Ericsson requires excluding value attributable to standard adoption; district court erred by not accounting for standardization and must adjust on remand |
| Relevance of the TLA (Radiata/Cisco agreement) | TLA is not comparable / dated / tied to chip prices so unreliable | TLA is a contemporaneous, actual royalty agreement (as amended) and must be reconsidered | Court: District court erred in rejecting TLA for several stated reasons; remand to reevaluate the as-amended TLA’s relevance |
| Use of Georgia-Pacific factors | District court correctly applied Georgia-Pacific to adjust starting rates | Georgia-Pacific factors must be adjusted for SEPs to avoid capturing value from standard adoption | Court: District court misapplied factors (not accounting for standardization); remand required to reweigh factors consistent with Ericsson |
Key Cases Cited
- Garretson v. Clark, 111 U.S. 120 (1884) (patentee must apportion damages between patented and unpatented features)
- Georgia-Pacific Corp. v. U.S. Plywood Corp., 318 F. Supp. 1116 (S.D.N.Y. 1970) (framework of 15 factors for reasonable royalty analysis)
- Ericsson, Inc. v. D-Link Sys., Inc., 773 F.3d 1201 (Fed. Cir. 2014) (SEP damages must exclude value from standard adoption; adjust Georgia-Pacific factors for SEPs)
- LaserDynamics, Inc. v. Quanta Comput., Inc., 694 F.3d 51 (Fed. Cir. 2012) (smallest salable patent-practicing unit principle and limits on provenance of license evidence)
- Uniloc USA, Inc. v. Microsoft Corp., 632 F.3d 1292 (Fed. Cir. 2011) (warning against using entire-market value without proof that the patented feature drives demand)
- Summit 6, LLC v. Samsung Elecs. Co., 802 F.3d 1283 (Fed. Cir. 2015) (admissibility requires data tied to case facts; reasonable royalty estimation is inexact)