United States Court of Appeals
for the Federal Circuit
______________________
TCL COMMUNICATION TECHNOLOGY
HOLDINGS LIMITED, TCT MOBILE LIMITED, TCT
MOBILE (US) INC.,
Plaintiffs-Appellees
v.
TELEFONAKTIEBOLAGET LM ERICSSON,
ERICSSON INC.,
Defendants-Appellants
______________________
2018-1363, 2018-1732
______________________
Appeals from the United States District Court for the
Central District of California in No. 8:14-cv-00341-JVS-
DFM, Judge James V. Selna.
--------------------------------------------
ERICSSON, INC., TELEFONAKTIEBOLAGET LM
ERICSSON,
Plaintiffs-Appellants
v.
TCL COMMUNICATION TECHNOLOGY
HOLDINGS LIMITED, TCT MOBILE LIMITED, TCT
MOBILE (US) INC.,
Defendants-Appellees
______________________
2 TCL COMMC’N TECH. v. TELEFONAKTIEBOLAGET LM
2018-1380, 2018-1382
______________________
Appeals from the United States District Court for the
Central District of California in No. 2:15-cv-02370-JVS-
DFM, Judge James V. Selna.
______________________
Decided: December 5, 2019
______________________
JEFFREY A. LAMKEN, MoloLamken LLP, Washington,
DC, argued for defendants-appellants and plaintiffs-appel-
lants. Also represented by EMILY DAMRAU, RAYINER
HASHEM, MICHAEL GREGORY PATTILLO, JR.; SARA
MARGOLIS, New York, NY; NICHOLAS M. MATHEWS,
THEODORE STEVENSON, III, McKool Smith, PC, Dallas, TX;
JOHN M. WHEALAN, Chevy Chase, MD.
STEPHEN S. KORNICZKY, Sheppard, Mullin, Richter &
Hampton LLP, San Diego, CA, argued for plaintiffs-appel-
lees and defendants-appellees. Also represented by MARTIN
BADER, MATTHEW HOLDER, ERICKA SCHULZ, KARIN DOUGAN
VOGEL.
DAVID S. STEUER, Wilson, Sonsini, Goodrich & Rosati,
PC, Palo Alto, CA, for amicus curiae InterDigital, Inc. Also
represented by MICHAEL BRETT LEVIN, MAURA L. REES.
JOHN D. HAYNES, Alston & Bird LLP, Atlanta, GA, for
amicus curiae Nokia Technologies Oy.
THOMAS ANDREW CULBERT, Perkins Coie, LLP, Seattle,
WA, for amicus curiae Uber Technologies, Inc. Also repre-
sented by KEVIN ANDREW ZECK.
STEVEN J. ROUTH, Orrick, Herrington & Sutcliffe LLP,
TCL COMMC’N TECH. v. TELEFONAKTIEBOLAGET LM 3
Washington, DC, for amicus curiae Panasonic Corporation.
Also represented by BENJAMIN PAUL CHAGNON, HANNAH
GARDEN-MONHEIT, JOHN ARPIO JURATA, JR.
PETER J. AYERS, Law Office of Peter J. Ayers, Austin,
TX, for amici curiae John Jarosz, Jeffrey H. Kinrich, Mi-
chael Chapman, Michael Wagner, Edward A. Gold, John
Bone, David Haas, Scott Weingust.
MICHAEL A. BITTNER, Winston & Strawn LLP, Dallas,
TX, for amicus curiae Peter Georg Picht.
JACOB KEVIN BARON, Holland & Knight, LLP, Boston,
MA, for amicus curiae Kelce Wilson.
JAMES R. BARNEY, Finnegan, Washington, DC, for
amici curiae Toyota Motor Corporation, Honda Motor Co.,
Ltd., Nissan Motor Co. Ltd., Denso Corporation, Hyundai
Motor Company. Also represented by DAVID BRIAN
KACEDON, JOSEPH PRESTON LONG.
KEVIN HARDY, Williams & Connolly LLP, Washington,
DC, for amici curiae High Tech Inventors Alliance, Alliance
of Automobile Manufacturers, Inc., Google LLC, Hewlett
Packard Enterprise Company, HP Inc. Also represented
by SAMUEL BRYANT DAVIDOFF.
DAVID H. HERRINGTON, Cleary, Gottlieb, Steen & Ham-
ilton LLP, New York, NY, for amicus curiae Fair Standards
Alliance ASBL. Also represented by ALEXANDRA
THEOBALD; DANIEL P. CULLEY, Washington, DC.
JENNIFER H. DOAN, Haltom & Doan, Texarkana, TX, for
amici curiae HTC Corporation, HTC America, Inc.
______________________
Before NEWMAN, CHEN, and HUGHES, Circuit Judges.
4 TCL COMMC’N TECH. v. TELEFONAKTIEBOLAGET LM
CHEN, Circuit Judge.
This appeal arises from a March 9, 2018 decision and
order issued by the United States District Court for the
Central District of California (the court) imposing “fair,
reasonable and non-discriminatory” (FRAND) rates in a
binding worldwide license on Appellants (Ericsson) and
Appellees (TCL) for Ericsson’s portfolio of standard-essen-
tial patents (SEPs) incorporated into 2G, 3G, and 4G mo-
bile communications standards.
The court-ordered license set forth two terms relevant
on appeal: (1) a prospective FRAND royalty rate for prac-
ticing each standard, and (2) a “release payment” computed
based on a closely related, retrospective FRAND rate for
“TCL’s past unlicensed sales.” To determine these rates,
the court conducted a ten-day bench trial, where the two
parties proposed different FRAND rates based on different
methodologies. Rejecting both parties’ proposed methodol-
ogies as flawed, the court employed its own modified ver-
sion of TCL’s proposed “top-down” approach in combination
with comparable license evidence to compute both the pro-
spective and retrospective FRAND rates.
The threshold issue on appeal is whether Ericsson had
a Seventh Amendment right to a jury trial on the adjudica-
tion of the “release payment” term. This inquiry turns on
whether the relief sought by the release payment is either
legal or equitable in nature. Because we conclude that the
release payment is in substance compensatory relief for
TCL’s past patent infringing activity, we hold that Ericsson
was entitled to a jury trial on the calculation of the release
payment amount, and that the district court deprived Er-
icsson of that right by determining that legal relief in a
bench trial. For the reasons explained below, we vacate-
in-part, reverse-in-part, and remand for further proceed-
ings consistent with this opinion.
TCL COMMC’N TECH. v. TELEFONAKTIEBOLAGET LM 5
BACKGROUND
Standards promote interoperability of different devices
through the use of the same protocol. Patents declared to
be essential to practicing a standard are often referred to
as SEPs. This case involves a portfolio of SEPs owned by
Ericsson incorporated into 2G, 3G, and 4G standards that
enable mobile devices from different manufacturers and
different networks to communicate with each other using
the same communication protocol.
A. ETSI and the FRAND Obligation
Ericsson is a member of the European Telecommunica-
tions Standards Institute (ETSI), which is the interna-
tional standard-setting organization responsible for
developing 2G, 3G, and 4G standards. For a patent to be-
come essential to an ETSI standard, ETSI members first
submit declarations identifying which of their patents or
applications may become essential to the standard. ETSI’s
acceptance of a member’s patent as an SEP forms a con-
tract between ETSI and its members. Together, the 2G,
3G, and 4G standards incorporate the technologies claimed
by thousands of SEPs, including over one hundred owned
by Ericsson.
Because interoperability requires the practice of these
standards, owners of such SEPs wield significant power
over implementers during licensing negotiations. To offset
this power imbalance and promote interoperability, the
contract imposes an obligation to license, referred to here
as the “FRAND obligation,” on ETSI members. J.A. 35. As
defined by § 6.1 of the ETSI Intellectual Property Rights
Policy, this obligation requires members to be “prepared to
grant irrevocable licenses” to implement their SEPs on
FRAND terms and conditions to implementers. J.A. 36.
Because this obligation is intended to benefit implementers
of ETSI standards, the implementers may assert their
rights created by the FRAND obligation as third-party ben-
eficiaries. Id.
6 TCL COMMC’N TECH. v. TELEFONAKTIEBOLAGET LM
TCL manufactures mobile devices that implement
these ETSI standards so that they may interoperate in the
mobile communications environment. As a member of
ETSI, Ericsson is bound by its contractual FRAND obliga-
tion to ETSI to be prepared to offer TCL FRAND-complaint
terms to license its SEP portfolio.
B. Licensing Negotiations
The parties have been negotiating licensing terms for
over a decade. In 2007, TCL and Ericsson entered into 2G
licenses with seven-year terms. TCL did not sell a mean-
ingful volume of 3G phones until 2011, when the two par-
ties began to negotiate a 3G license in earnest. In 2012,
while the parties were negotiating, Ericsson initiated a se-
ries of foreign litigations against TCL for alleged infringe-
ment of Ericsson’s SEPs in six different jurisdictions
(France, United Kingdom, Brazil, Russia, Argentina, and
Germany). In 2013, TCL began selling 4G phones, and the
parties began negotiating a license covering Ericsson’s 4G
SEPs. That year, Ericsson offered 4G rates to TCL for the
first time. But TCL did not consider any of Ericsson’s offers
or counteroffers to be on FRAND terms. In a 2014 meeting,
Ericsson made a license offer that TCL stated “look[ed]
promising.” J.A. 31.
Before the parties reached agreement, TCL filed a de-
claratory judgment action against Ericsson in the Central
District of California. This was filed right before TCL’s 2G
licenses with Ericsson were set to expire. J.A. 32. When
negotiations finally failed, the parties agreed to engage in
a binding court adjudication of terms for a worldwide port-
folio license. J.A. 32. The adjudication of these terms is
the subject of this appeal.
PROCEDURAL HISTORY
The case below is a consolidation of two district court
actions. The first action was initiated by TCL in March
2014, when it filed suit against Ericsson in the Central
TCL COMMC’N TECH. v. TELEFONAKTIEBOLAGET LM 7
District of California (the California Action). The second
action followed in June 2014, when Ericsson filed suit
against TCL in the Eastern District of Texas (the Texas
Action).
In the California Action, TCL sought declaratory judg-
ment that Ericsson had failed to offer a FRAND rate to
TCL. J.A. 469. In its prayer for relief, TCL requested that
the court “[d]etermine the FRAND rates that TCL is enti-
tled to,” “[d]ecree that Ericsson has not offered [FRAND]
royalties to TCL,” and “[d]ecree that TCL is entitled to li-
cense from Ericsson any and all [SEPs] under [FRAND]
terms and conditions.” J.A. 683. TCL also sought damages
for infringement of its own patents, as well as various state
law claims based on Ericsson’s contractual FRAND obliga-
tion with ETSI (e.g., breach of contract, promissory estop-
pel, violation of California Unfair Competition Law). J.A.
641.
In the Texas Action, Ericsson sought damages for in-
fringement of two individually-asserted SEPs, U.S. Patent
No. 6,301,556 and U.S. Patent No. 6,473,506, for which
TCL filed counterclaims of invalidity and non-infringement
(collectively, Ericsson’s patent infringement claims and
TCL’s related counterclaims of invalidity and non-infringe-
ment). Ericsson further requested that the court declare
“that [it] complied with its FRAND commitments . . . or, al-
ternatively, adjudge and declare what steps would be re-
quired for Ericsson to achieve such compliance.” J.A.
60828.
The two Actions were consolidated in June 2015 when
the Texas Action was transferred to the Central District of
California. The same day, the court granted TCL’s motion
to enjoin Ericsson “from further prosecuting any actions al-
leging infringement of its 2G, 3G, and 4G patents until the
FRAND issues are resolved” in the Central District of Cal-
ifornia. J.A. 32–33 (referring to J.A. 4687).
8 TCL COMMC’N TECH. v. TELEFONAKTIEBOLAGET LM
A. Ericsson’s Proposed License Offers to TCL
The court ordered the parties to provide contentions de-
fining the contents of a FRAND license. J.A. 131713. In
response, Ericsson proposed two alternative license offers,
“Option A” and “Option B,” in its contentions. J.A. 2718–
78; J.A. 4795–857. Eventually, the court ruled that the
FRAND determination would be made in reference to Er-
icsson’s Option A and B offers. J.A. 38768–70.
Option A proposed a lump-sum payment with percent-
age running royalties. Under Option A for mobile phones,
TCL would make an annual payment of $30 million for its
first $3 billion in sales, with percentage running royalty
rates for additional sales. These running royalty rates
were 0.8% of the net selling price for phones with 2G
GSM/GPRS, 1.1% for phones with 2G EDGE, 1.5% for 3G
devices, and 2.0% for 4G devices.
Option B proposed only running royalties with caps
and floors. Under Option B for mobile phones, TCL would
pay percentage running rates as follows: 0.8% of the net
selling price of 2G/GSM/GPRS, 1.0% for 2G EDGE, 1.2%
for 3G, and 1.5% for 4G with a $2.00 floor and a $4.50 cap.
In both options, Ericsson proposed a “release payment”
for “TCL’s past unlicensed sales.” J.A. 33. Both parties
agreed that the release payment would be part of the court-
ordered FRAND license. J.A. 131911.
B. Discussion of Jury Trial Issues
In January 2015, the parties filed a joint report stipu-
lating to various agreements and understandings about
which issues should be decided by a jury. At the time, both
legal and equitable claims were still active. TCL’s damages
claim for breach of contract was legal. TCL’s claim for the
court to set a prospective FRAND rate for the license was
equitable. These two claims shared a common issue:
whether Ericsson’s licensing offer complied with its
FRAND obligations. J.A. 1893–94. Under Dairy Queen,
TCL COMMC’N TECH. v. TELEFONAKTIEBOLAGET LM 9
Inc. v. Wood, 369 U.S. 469, 472–73 (1962), legal claims
must be tried first to a jury where they share common is-
sues with equitable claims. Thus, the parties agreed to a
two-step approach: (1) a jury would decide the common is-
sue of whether Ericsson’s offer complied with its FRAND
obligation, and (2) if the jury answered no, a bench trial
would be conducted to revise terms in the offer to be com-
pliant with FRAND. J.A. 1892–934.
By mid-August 2016, all of TCL’s claims and counter-
claims seeking damages had been dismissed or were no
longer viable in view of other motions. 1 However, Erics-
son’s counterclaims seeking damages for patent infringe-
ment, which had been stayed by the court, still remained.
While Ericsson acknowledged that the claims and
counterclaims remaining for adjudication in the upcoming
trial only sought specific performance or declaratory judg-
ment as remedies, it insisted that a jury trial was required.
According to Ericsson, the release payment term, which
was “money for [TCL’s] past patent infringement,” was “de-
cidedly legal” and thus entitled “Ericsson to a jury on all
asserted claims.” J.A. 38827–28. The court disagreed. In
a January 2017 final pre-trial conference order, the court
acknowledged Ericsson’s assertions of its jury trial right
but indicated that it had nevertheless decided to proceed
with a bench trial. J.A. 48694. On the day of trial, right
before the first witness was called, Ericsson renewed its
1 On August 8, 2016, the court granted Ericsson’s
motion for partial summary judgment as to no damages for
TCL’s state law claims of breach of contract, promissory es-
toppel, and violation of California’s Unfair Competition
Law, finding that “TCL ha[d] failed to satisfy its burden on
summary judgment to come forward with admissible evi-
dence to create a triable issue of fact on damages.” J.A.
38805.
10 TCL COMMC’N TECH. v. TELEFONAKTIEBOLAGET LM
objection, noting for the record that it had not “waived [its]
right to a jury trial.” J.A. 51642.
C. Bench Trial
On February 14, 2017, the court commenced a ten-day
bench trial. To assist the court in determining whether Er-
icsson’s alternative offers were FRAND, the parties pro-
posed different methodologies for computing FRAND rates.
While the parties’ competing methodologies sought to esti-
mate the incremental value that Ericsson’s SEPs added to
the relevant standard, they did so in different ways.
1. TCL’s “Top-Down” Implementation
TCL proposed a “top-down” approach “which begins
with an aggregate royalty for all patents encompassed in a
standard” and “then determines a firm’s portion of that ag-
gregate.” J.A. 29. In other words, this approach is “top-
down” because it starts by determining the value of the
whole royalty pie corresponding to a given standard (e.g.,
2G, 3G, 4G) and then determines Ericsson’s slice of the pie
for that standard.
To determine the maximum aggregate royalty assigned
to each standard, TCL relied on Ericsson’s own public
statements about what that ceiling rate should be. Erics-
son made these statements prior to ETSI’s adoption of each
standard. For example, in 2008, Ericsson indicated on its
website that it believed the “reasonable maximum aggre-
gate royalty level” for the then-upcoming LTE standard to
be “6–8% for handsets.” J.A. 48.
TCL’s top-down approach computed a different
FRAND rate for licensing Ericsson’s SEP portfolio for each
standard based on the following general equation:
𝑭𝑭𝑭𝑭𝑭𝑭𝑭𝑭𝑭𝑭 𝒓𝒓𝒓𝒓𝒓𝒓𝒓𝒓𝒓𝒓𝒓𝒓𝒓𝒓 𝒓𝒓𝒓𝒓𝒓𝒓𝒓𝒓
= (𝒎𝒎𝒎𝒎𝒎𝒎𝒎𝒎𝒎𝒎𝒎𝒎𝒎𝒎 𝒂𝒂𝒂𝒂𝒂𝒂𝒂𝒂𝒂𝒂𝒂𝒂𝒂𝒂𝒂𝒂𝒂𝒂 𝒓𝒓𝒓𝒓𝒓𝒓𝒓𝒓𝒓𝒓𝒓𝒓𝒓𝒓 𝒓𝒓𝒂𝒂𝒂𝒂𝒂𝒂)
× (𝑬𝑬𝑬𝑬𝑬𝑬𝑬𝑬𝑬𝑬𝑬𝑬𝑬𝑬𝑬𝑬′𝒔𝒔 𝒑𝒑𝒑𝒑𝒑𝒑𝒑𝒑𝒑𝒑𝒑𝒑𝒑𝒑𝒑𝒑𝒑𝒑𝒑𝒑𝒑𝒑𝒑𝒑 𝒔𝒔𝒔𝒔𝒔𝒔𝒔𝒔𝒔𝒔)
× (𝒂𝒂𝒂𝒂𝒂𝒂𝒂𝒂𝒂𝒂𝒂𝒂𝒂𝒂𝒂𝒂𝒂𝒂𝒂𝒂 𝒇𝒇𝒇𝒇𝒇𝒇𝒇𝒇𝒇𝒇𝒇𝒇𝒇𝒇)
TCL COMMC’N TECH. v. TELEFONAKTIEBOLAGET LM 11
For each standard, Ericsson’s proportional share was com-
puted by dividing the number of SEPs owned by Ericsson
(numerator) by the total number of SEPs in that standard
(denominator). The proportional share was then adjusted
by various factors, such as “importance and contribution of
each patent family,” to account for the “relative strength”
of Ericsson’s SEPs compared to other SEPs in a particular
standard. J.A. 41–42, 64–66. According to TCL’s top-down
methodology, the rates proposed in Ericsson’s Option A and
Option B were not FRAND-compliant because they sub-
stantially exceeded the FRAND rates yielded from the top-
down approach.
2. Ericsson’s Proposed Approach
Ericsson did not offer its own version of a top-down ap-
proach. Rather, to show that the royalty rates it offered to
TCL in Options A and B satisfied FRAND, it presented ev-
idence of (1) existing licenses it had negotiated with other
implementers and those it had prepared for the purposes
of business cases and (2) rates produced from an alterna-
tive methodology that sought to measure in absolute terms
the value which Ericsson’s patents added to 4G products. 2
3. “Comparable” Licenses
The parties disputed how “comparable” the existing li-
censes actually were to those that would be offered to TCL
in a hypothetical negotiation. The parties agreed that four
firms were similarly situated to TCL (Huawei, LG, HTC,
2 Dubbed the “ex-Standard” approach by Ericsson’s
experts, this evidence was not comprehensive, because it
was limited to estimating the value of Ericsson’s SEPs in-
corporated into the 4G standard only. We do not discuss
this approach in detail, because its analysis was entirely
rejected by the court as “lack[ing] fundamental credibility,”
J.A. 79, and Ericsson does not dispute that rejection on ap-
peal.
12 TCL COMMC’N TECH. v. TELEFONAKTIEBOLAGET LM
ZTE), but they disagreed on whether four others (Apple,
Samsung, Coolpad, Karbonn) were similarly situated to
TCL. J.A. 83.
BENCH TRIAL DECISION
Following the bench trial, the court issued a lengthy
decision setting forth terms for a binding worldwide license
to Ericsson’s 2G, 3G, and 4G SEPs. The court amended
this decision in an Amended Memorandum of Findings of
Fact and Conclusions of Law on March 9, 2018 (“bench trial
decision”), which is the subject of this appeal. J.A. 27–141.
Over Ericsson’s repeated assertions of its jury trial
right, the court explained in a single sentence that it had
decided to proceed with a bench trial after it “ruled that
TCL’s remaining claims were equitable.” J.A. 34–35. The
court did not address Ericsson’s argument about the legal
nature of the release payment remedy.
The court articulated a two-step framework agreed
upon by the parties for resolving the remaining issues. At
the first step, the court determined whether Ericsson’s fi-
nal offers proposed prior to trial satisfied FRAND. J.A. 28. 3
If the court answered no, it would proceed to the second
step, where it would supply the material FRAND terms.
J.A. 28–29.
A. Step 1: The court concludes that Ericsson’s offers
did not satisfy FRAND.
To determine whether Ericsson’s offers were FRAND,
the court first turned to the different rates produced by the
two parties’ methodologies. The court did not accept either
3 As part of this inquiry, the court first determined
whether Ericsson complied with its “FRAND obligation” by
negotiating with TCL in good faith. The court answered
this in the affirmative, J.A. 29, and TCL does not dispute
that finding on appeal.
TCL COMMC’N TECH. v. TELEFONAKTIEBOLAGET LM 13
party’s proposed rates because it found their methodologies
to be flawed. Instead, the court devised its own version of
the top-down method to determine a “fair and reasonable”
rate under FRAND. It then compared Ericsson’s proposed
offers to comparable licenses to determine whether they
were “non-discriminatory’ under the third element of
FRAND. Based on these two approaches, it concluded that
“Ericsson’s offers are not fair and reasonable, and are dis-
criminatory.” J.A. 139.
1. The court uses its own modified version of TCL’s top-
down approach to determine whether Ericsson’s of-
fers are “fair and reasonable” under FRAND.
First, while the court noted that the top-down method
was “not necessarily a substitute for a market-based ap-
proach that considers comparable licenses,” J.A. 41, it de-
scribed the unique benefits of using a top-down approach
to mitigate two main risks that arise in the SEP licensing
context.
One risk is royalty stacking. As the court explained,
“[s]tacking occurs when each individual SEP holder de-
mands a royalty which when totaled exceeds the value of
all the SEPs in a standard.” J.A. 41. Because the top-down
approach computes the FRAND rate for a particular SEP
or SEP portfolio by starting with the maximum aggregate
royalty burden, reasoned the court, “it avoid[s] the possi-
bility that licensees will be forced to pay an unreasonable
amount in total.” Id.
Another risk is patent owner hold-up. This occurs
when a patent-owner seeks to extract excessive value from
its SEPs after the implementer is “locked-in” to using the
standard. Regardless of the value contributed to the stand-
ard by the SEP, the implementer must practice the SEP in
order to practice the whole standard. Because the top-
down approach limits the overall size of the royalty pie, the
court reasoned that the top-down approach “can also
14 TCL COMMC’N TECH. v. TELEFONAKTIEBOLAGET LM
prevent hold-up” because it “prevents SEP owners from
charging a premium for the value added by standardiza-
tion.” Id.
Second, while the court found “fatal flaws” with TCL’s
analysis of the relative “importance and contribution” of
Ericsson’s SEP portfolio compared to that of the other SEPs
in the relevant standards, the court still found “some value
in the technical analysis, particularly to show that Erics-
son’s patent portfolio is certainly not as strong or essential
as it has claimed.” J.A. 69. Thus, it “use[d] this finding in
part to assist it in determining the final FRAND rate.” Id.
Specifically, the court substituted its own values for the im-
portance and contribution values calculated by TCL’s ex-
perts, adopting a “simple patent counting system which
treats every patent [incorporated in the standard] as pos-
sessing identical value, and then applies the numbers that
it found reliable from the analyses provided by TCL’s ex-
perts.” J.A. 42–43.
Though the court admitted that it had “some reserva-
tions about the top down analysis,” it determined that
there was “no basis to reconcile the results” of its own mod-
ified version of the top-down methodology with the sub-
stantially higher rates proposed in Option A or Option B.
J.A. 72–75. The court therefore concluded that Ericsson’s
offers were not fair and reasonable. J.A. 75.
2. The court uses comparable licenses to determine
whether Ericsson’s offers are “non-discriminatory”
under FRAND.
The court only used licenses of similarly situated licen-
sees to determine whether Ericsson’s offers were non-dis-
criminatory. First, the court determined which licensees
were “similarly situated” to TCL such that their licenses
would serve as “comparable” points of comparison. J.A. 82.
The parties agreed that four firms were similarly situated
to TCL: Huawei, LG, HTC, and ZTE. J.A. 83. But they
disputed whether four others (Apple, Samsung, Coolpad,
TCL COMMC’N TECH. v. TELEFONAKTIEBOLAGET LM 15
Karbonn) were also similarly situated to TCL. Ultimately,
the court resolved the dispute based on geographic scope,
agreeing with TCL that global firms such as Apple and
Samsung were similarly situated to TCL (which is also a
global firm) but that “local kings” such as Coolpad (whose
market is primarily in China) and Karbonn (whose market
is primarily India) were not. J.A. 84–85. Thus, the court
concluded that the following six firms were similarly situ-
ated: Apple, Samsung, LG, HTC, Huawei, and ZTE. J.A.
84.
Second, relying on expert evidence, the court unpacked
the six “similarly situated” licenses and Ericsson’s offers to
an effective per-unit royalty rate so that they could be com-
pared to each other on a “common basis.” J.A. 80. In de-
termining what form this common basis would take, the
court rejected a dollar-per-unit rate in favor of a pure “per-
centage royalties without caps or floors.” J.A. 94–95.
Finally, the court compared the unpacked effective roy-
alty rates from the comparable licenses to those proposed
in Ericsson’s offers and concluded that Ericsson’s offers
were discriminatory because the unpacked effective royalty
rates of Option A and Option B were “radically divergent
from rates which Ericsson agreed to accept from licensees
similarly situated to TCL.” J.A. 120. Moreover, the court
added that “Ericsson’s use of floors in its rates is itself dis-
criminatory.” J.A. 139. “In the absence of a credible show-
ing that Ericsson’s SEPs add a measurable incremental
value,” explained the court, “there is no basis for essen-
tially discriminating on the basis of the average selling
price where a floor would result in a higher effective rate
for lower price phones.” Id.
B. Step 2: The court sets prospective and retrospec-
tive FRAND rates in the license.
At the second step of the two-step framework, the court
relied on its FRAND analysis in the first step to supply
FRAND terms of the binding license. These terms included
16 TCL COMMC’N TECH. v. TELEFONAKTIEBOLAGET LM
(1) a prospective FRAND rate for TCL’s future licensed
practice of Ericsson’s SEPs and (2) a cumulative release
payment for TCL’s past unlicensed practice of Ericsson’s
SEPs. This release payment was calculated based on a ret-
rospective FRAND rate that was closely related to the pro-
spective FRAND rate computed by the court.
To compute the ongoing FRAND royalty rate, the court
began by “looking at the combination of rates derived from
the top down and comparable license analyses.” J.A. 120.
The court ultimately set a FRAND royalty rate that gener-
ally fell within the range of rates produced by those two
approaches where appropriate. 4 J.A. 130.
The court used this first FRAND rate to compute the
second “release payment” term. Specifically, the court com-
puted the retrospective FRAND rate by discounting the on-
going FRAND royalty for present value and potential roy-
alty stacking to arrive at a cumulative release payment to
compensate Ericsson for TCL’s patent infringement.
J.A. 130–33.
Pursuant to the bench trial decision, the court issued
an Amended Final Judgment and Injunction, ordering that
Ericsson’s patent infringement claims 5 and TCL’s related
counterclaims of invalidity and non-infringement be “dis-
missed without prejudice because they are moot in light of
the equitable relief granted in the release payment.”
J.A. 24. Specifically, the court ordered Ericsson to “release
TCL and all customers of TCL who have purchased or used
4 Because the court “could not reliably unpack 2G
rates from any comparable license,” it adopted the rate pro-
duced by the top-down approach. J.A. 129.
5 These refer to the patent infringement claims that
Ericsson originally filed in the Texas Action prior to consol-
idation with the California Action.
TCL COMMC’N TECH. v. TELEFONAKTIEBOLAGET LM 17
products herein licensed to TCL from claims for past patent
infringement . . . .” J.A. 14.
Ericsson filed a timely appeal. Because this appeal in-
volves the dismissal of Ericsson’s patent infringement
claims, we have jurisdiction under 28 U.S.C. § 1295(a)(1).
DISCUSSION
The district court made four determinations in its
bench trial decision that resolution of the issues on appeal
will impact. First, it concluded that Ericsson’s proposed
terms to TCL were not FRAND. Second, the court set a
prospective FRAND royalty rate for TCL’s future use of Er-
icsson’s SEPs, relying on a combination of methodologies,
including its own modified version of TCL’s proposed top-
down approach and comparable licenses. Third, the court
set a “release payment for TCL’s past unlicensed sales” by
adjusting its calculated prospective FRAND royalty rate.
J.A. 33. The two rates computed in the second and third
determinations were imposed in a court-ordered license
agreement by which the parties had agreed to be bound
prior to the bench trial. Fourth, the district court ordered
the dismissal of Ericsson’s patent infringement claims and
TCL’s related counterclaims of invalidity and non-infringe-
ment as moot in light of the relief granted in the release
payment, because any damages amount from those in-
fringement claims were already subsumed in the release
payment determination.
On appeal, Ericsson argues that all four determina-
tions are erroneous for two main reasons: (1) they at least
in part should have been determined by a jury, not the
bench, 6 and (2) they were premised on various errors in the
6 On appeal, Ericsson presents three independent
reasons why it was deprived of its right to a jury trial under
the Seventh Amendment: (1) the declaratory judgment ac-
tion tried by the court was an inverted patent infringement
18 TCL COMMC’N TECH. v. TELEFONAKTIEBOLAGET LM
court’s FRAND analysis. 7 Because the first reason is suf-
ficient to overturn all four determinations, we turn first to
that issue in this opinion.
suit, which entitled Ericsson to a jury trial; (2) the court
resolved common issues that are typically litigated in pa-
tent infringement suits for damages (e.g., determining
which licenses are comparable, weighing expert credibility,
and assessing various data points to rule that Ericsson’s
offers were not FRAND) prior to adjudicating the remain-
ing equitable claims, thereby depriving Ericsson of its right
to a jury trial on the legal issues; and (3) by adjudicating
the release payment amount that was retrospective mone-
tary compensation for past wrongs, the court improperly
determined legal relief without a jury. Because we con-
clude that the third reason is in itself sufficient to overturn
all of the court’s rulings below, we do not address Ericsson’s
other two alleged reasons.
7 Ericsson’s appeal primarily focuses on three argu-
ments. First, it argues that the court erred in determining
royalty rates that were “reasonable” because it employed a
“simple counting method” that allegedly presumed each of
Ericsson’s SEPs to possess equal value with all other SEPs
in a standard, instead of measuring the incremental value
that each patent added to the standard. Second, Ericsson
argues that the court employed an unreliable methodology
to compute Ericsson’s “proportional share” of the maximum
aggregate royalty of all SEPs in each standard because it
used wildly divergent approaches to calculate the numera-
tor and denominator, resulting in under-compensation to
Ericsson. Third, Ericsson argues that the court’s treat-
ment of comparable licenses was fundamentally flawed be-
cause, among other reasons, it rejected dollar-per-unit
royalty rates as per se discriminatory without pointing to
any legal authority.
TCL COMMC’N TECH. v. TELEFONAKTIEBOLAGET LM 19
For reasons discussed below, we agree with Ericsson’s
first point. 8 Because we conclude that the release payment
is in substance compensatory relief for TCL’s past wrongs
(i.e., practicing Ericsson’s patented technologies without a
license), we hold that the district court deprived Ericsson
of its constitutional right to a jury trial on that legal relief
by requiring that Ericsson adjudicate that relief in a bench
trial.
A. Ericsson’s Right to a Jury Trial
We review “the constitutional question of whether a
party is entitled to a jury trial” de novo. Tegal Corp. v. To-
kyo Electron Am., Inc., 257 F.3d 1331, 1339 (Fed. Cir.
2001).
The Seventh Amendment provides that, “[i]n Suits at
common law, where the value in controversy shall exceed
twenty dollars, the right of trial by jury shall be pre-
served . . . .” U.S. CONST. amend. VII. The Supreme Court
has interpreted “Suits at common law” to refer to actions
that are “analogous” to 18th-century suits brought in the
English courts of law prior to the Amendment’s adoption.
Tull v. United States, 481 U.S. 412, 417 (1987). This pre-
served right extends not only to common-law forms of
8 As Ericsson confirmed during oral argument, we
need not reach any of its arguments challenging the dis-
trict court’s FRAND analysis if we conclude that the dis-
trict court violated Ericsson’s right to a jury trial. See Oral
Arg. at 16:56–17:46. In light of our disposition vacating the
district court’s FRAND analysis and remanding for the
jury to decide in the first instance, we do not address Er-
icsson’s other challenges to the district court’s opinion. See,
e.g., Honeywell Int’l Inc. v. Hamilton Sundstrand Corp.,
370 F.3d 1131, 1144 (Fed. Cir. 2004) (vacating the infringe-
ment judgment and not addressing the challenges to the
district court’s rulings limiting damages).
20 TCL COMMC’N TECH. v. TELEFONAKTIEBOLAGET LM
action, but also to causes of action created by congressional
enactment. Id.
“To determine whether a particular action will resolve
legal rights, we examine both the nature of the issues in-
volved and the remedy sought.” Chauffeurs v. Terry, 494
U.S. 558, 565 (1990). “First, we compare the statutory ac-
tion to 18th-century actions brought in the courts of Eng-
land prior to the merger of the courts of law and equity.
Second, we examine the remedy sought and determine
whether it is legal or equitable in nature.” Tull, 481 U.S.
at 417–18 (internal citations omitted). “The second inquiry
is the more important in [this] analysis.” Chauffeurs, 494
U.S. at 565.
In cases that have “legal and equitable claims,” and is-
sues common to both, the court must conduct a jury trial
on “any legal issues for which a trial by jury is timely and
properly demanded.” Dairy Queen, 369 U.S. at 472–73.
Just as the right to a jury trial on legal claims cannot be
denied directly by refusing a jury-trial demand, the right
“must not be infringed” indirectly “by trying the legal is-
sues as incidental to the equitable ones or by a court trial
of a common issue.” Ross v. Bernhard, 396 U.S. 531, 537–
38 (1970). The “right to a jury trial of legal issues” cannot
be “lost through prior determination of equitable claims.”
Beacon Theatres, Inc. v. Westover, 359 U.S. 500, 511 (1959).
In deciding to proceed with a bench trial on all remain-
ing issues in this case, the district court concluded that a
jury trial was not necessary because it “ruled that TCL’s
remaining claims were equitable.” J.A. 34–35. On appeal,
Ericsson argues that it was deprived of its Seventh Amend-
ment right because the court conducted a bench trial to ad-
judicate the release payment term, which is legal relief.
We agree.
TCL COMMC’N TECH. v. TELEFONAKTIEBOLAGET LM 21
1. The release payment provides legal relief.
The parties dispute whether the relief provided by the
release payment is legal or equitable. Ericsson focuses on
the substance of the relief, arguing that the release pay-
ment is legal because it is compensation for TCL’s past pa-
tent infringement of Ericsson’s SEPs. Appellants’ Br. at
35–37. TCL, on the other hand, argues that the release
payment is equitable based on the form the relief takes. As
a term included in an injunction order, TCL argues that
the release payment constitutes specific performance for a
term in a contract. Appellees’ Br. at 19. TCL also sepa-
rately argues that the release payment is equitable be-
cause it was ordered as restitution for TCL’s past
unlicensed sales. Id. at 26–27. According to TCL, the re-
lease payment was a “way to retroactively restore to Erics-
son that which it would have already received if the
FRAND terms and conditions had previously been set, and
a license not delayed.” Id. at 27.
That the release payment was ordered in the form of
an injunction does not necessarily make it equitable. See,
e.g., Great-West Life & Annuity Ins. Co. v. Knudson, 534
U.S. 204, 208, 214 (2002) (holding an injunction ordering
money funds to be legal relief because it sought to “impo[se]
personal liability for the benefits that they conferred upon
respondents”). Nor is the monetary nature of the release
payment dispositive of legal relief. See, e.g., Bowen v. Mas-
sachusetts, 487 U.S. 879, 893 (1988) (holding that mone-
tary relief was equitable because it sought reimbursement
to which the State was allegedly already entitled, rather
than money in compensation for losses suffered); Paice
LLC v. Toyota Motor Corp., 504 F.3d 1293, 1315–16 (Fed.
Cir. 2007) (holding that the court did not violate patent
owner’s right to a jury trial by calculating an “ongoing roy-
alty rate” for patent infringement in a bench trial). Indeed,
not all payments of money constitute legal “damages.”
Paice, 504 F.3d at 1316. And even if the monetary relief
can be characterized as restitution, as TCL advocates here,
22 TCL COMMC’N TECH. v. TELEFONAKTIEBOLAGET LM
that does not end the inquiry, because restitution can be
either legal or equitable. Great-West Life, 534 U.S. at 212
(“In the days of the divided bench, restitution was available
in certain cases at law, and in certain others in equity.”).
To determine which type of common law restitution the re-
lease payment is more analogous to, we focus on “the basis
of [Ericsson’s] claim” and “the nature of the underlying
remedies sought.” See id. at 213.
We agree with Ericsson that the release payment term
is legal in nature and thus entitled to a jury trial determi-
nation. Ericsson’s offers to TCL refer to the release pay-
ment term as “release payment for past unlicensed sales,”
but the court consistently treated this payment as retro-
spective compensation for TCL’s past patent infringement.
It is a “well-settled principle that jury trials are available
for damages for patent infringement.” 9 C. WRIGHT & A.
MILLER, FEDERAL PRACTICE AND PROCEDURE § 2312 (3d ed.
2018); see also Markman v. Westview Instruments, Inc., 517
U.S. 370, 377 (1996) (analogizing “today’s patent infringe-
ment action” to “the infringement actions tried at law in
the 18th century,” which “must be tried to a jury”).
For example, in its bench trial decision, the court de-
fined the function of the release payment as compensation,
explaining that both of Ericsson’s offers “specify a release
payment intended to compensate Ericsson for TCL’s unli-
censed use of Ericsson’s SEPs . . . .” J.A. 33 (emphasis
added). In its March 9, 2018 Amended Final Judgment and
Injunction, which was subject to both parties’ review, the
court elaborated that the compensatory relief was for past
patent infringement. It ordered: “Upon the receipt by Er-
icsson of the release payments set forth in Clause E by
TCL, Ericsson shall release TCL . . . from claims for past
patent infringement . . . .” J.A. 14 (emphasis added). Most
tellingly, the court dismissed Ericsson’s counterclaims of
patent infringement as moot in light of the release pay-
ment. J.A. 23. Thus, the court’s own actions confirm that
TCL COMMC’N TECH. v. TELEFONAKTIEBOLAGET LM 23
the release payment functions as a substitute for patent
infringement damages. 9
TCL’s attempt to recharacterize the release payment
as restitution for “TCL’s past unlicensed sales” is unavail-
ing because it improperly focuses on the form of the relief,
rather than its underlying substance. As the Supreme
Court has explained, “for restitution to lie in equity, the
action generally must seek not to impose personal liability
on the defendant, but to restore to the plaintiff particular
funds or property in the defendant’s possession.” Great-
West Life, 534 U.S. at 214. In contrast, if the basis of the
release payment is to provide a “substitute” remedy for
“benefits” conferred to TCL, then the claim is legal. See
Bowen, 487 U.S. at 895 (“Damages are given to the plaintiff
to substitute for a suffered loss, whereas specific remedies
‘are not substitute remedies at all, but attempt to give the
plaintiff the very thing to which he was entitled.’”) (inter-
nal citations omitted); see also Great-West Life, 534 U.S. at
214 (“The basis for petitioners’ claim is . . . that petitioners
are contractually entitled to some funds for benefits that
they conferred. The kind of restitution that petitioners
seek, therefore, is not equitable . . . but legal—the imposi-
tion of personal liability for the benefits that they conferred
upon respondents.”).
9 In dismissing Ericsson’s patent infringement
claims and TCL’s related counterclaims of invalidity and
non-infringement, the court explained that they were
“moot in light of the equitable relief granted in the release
payment.” J.A. 24 (emphasis added). The court’s label of
“equitable relief” does not impact our conclusion that the
release payment is in substance compensation for past pa-
tent infringement for the reasons discussed in this opinion,
especially since the court itself characterized the release
payment as releasing TCL from “claims for past infringe-
ment” in the same order. J.A. 14.
24 TCL COMMC’N TECH. v. TELEFONAKTIEBOLAGET LM
Here, the “basis” of the release payment is not that
TCL holds “particular funds” that a court could then re-
store to the possession of its “true owner,” Ericsson. See
Great-West Life, 534 U.S. at 213–14. Nor is it a “reimburse-
ment” of funds to which Ericsson was already entitled, akin
to the equitable relief in Bowen. See 487 U.S. at 895. Ra-
ther, as payment for “TCL’s past unlicensed sales,” the re-
lease payment seeks to estimate the benefits conferred to
TCL from selling products that practiced Ericsson’s SEPs
without a license. See Great-West Life, 534 U.S. at 214.
And given that TCL does not dispute infringement of Er-
icsson’s SEPs, 10 it is hard to see how a payment for TCL’s
past unlicensed sales is in substance materially different
from damages for past patent infringement.
At bottom, regardless of whether we characterize the
release payment term as compensation for “past patent in-
fringement” or restitution for “TCL’s past unlicensed
sales,” the underlying nature of the relief is legal. Accord-
ingly, we conclude that Ericsson was entitled to a jury trial
on the determination of the release payment amount under
the Seventh Amendment.
2. Ericsson did not waive its right to a jury trial on the
release payment term.
TCL suggests that Ericsson waived its right to a jury
trial by consenting to a bench trial on the release payment
term. Appellees’ Br. at 16. In support, TCL points to a
single statement made by Ericsson in its August 15, 2016
response to TCL’s ninth set of interrogatories. Id. Therein,
Ericsson stated: “The release payment that TCL owes Er-
icsson for its past unlicensed sales of 2G, 3G, and 4G
10 Indeed, TCL alleged that its products “complied”
with the 2G, 3G, and 4G standards, J.A. 444 ¶ 3, and con-
ceded that Ericsson’s SEP families were “essential” to
those standards. J.A. 63.
TCL COMMC’N TECH. v. TELEFONAKTIEBOLAGET LM 25
devices will be determined by the Court at the conclusion
of this litigation.” J.A. 38867.
When read in context of the record as a whole, we de-
cline to interpret this isolated statement as a waiver of Er-
icsson’s constitutional right, because the more reasonable
reading is to view this statement as conditioned upon an
initial jury determination of whether Ericsson’s offers were
FRAND. See Aetna Ins. Co. v. Kennedy, 301 U.S. 389, 393
(1937) (“[A]s the right of jury trial is fundamental, courts
indulge every reasonable presumption against waiver.”).
On January 20, 2015, the parties filed a joint report
agreeing to a two-stage adjudication process where: (1) the
jury would decide whether Ericsson’s offers were FRAND
and (2) if not, the court would conform the offer terms to be
compliant with FRAND. J.A. 1892. As the joint report ex-
plained, the reason why the jury had to decide the first is-
sue was because that issue was the “key factual dispute
underlying all of” the legal (e.g., “money damages”) and eq-
uitable claims that were then live in the case. Id. Because
Dairy Queen requires common issues to legal and equitable
claims to be tried to a jury first, the parties stipulated that
this common issue “must therefore be decided by a jury.”
Id.
Admittedly, TCL’s claims and counterclaims seeking
damages (e.g., infringement of its own patents, breach of
contract) had been dismissed by the time Ericsson filed its
interrogatory response. Because the parties’ original rea-
son for requiring a jury determination no longer existed,
TCL argues that the court properly decided the case in a
bench trial consistent with the rationale underlying the
stipulated plan. Appellees’ Br. at 17–18.
We are unpersuaded. Just because the originally artic-
ulated basis for requiring a jury disappeared does not mean
that Ericsson waived its jury trial right resting on other
bases. Indeed, on August 15, 2016, Ericsson filed a “court-
requested submission regarding remaining claims and
26 TCL COMMC’N TECH. v. TELEFONAKTIEBOLAGET LM
requirement of a jury trial,” Ericsson explicitly identified
the “release payment” term as an alternative basis for a
jury trial:
[T]he nature of the remedy sought by the parties—
a binding payment obligation that requires TCL to
pay royalties to Ericsson on a going forward basis
and to make a release payment of money for its past
patent infringement—entitles Ericsson to a jury on
all asserted claims . . . . The nature of this binding
payment obligation, i.e., the payment of money as
compensation to Ericsson for past and future in-
fringement by TCL, is decidedly legal. But even if
the remedy was a mix of equitable and legal reme-
dies, the legal remedies sought confer a jury trial
right.
J.A. 38827–33 (emphases added). Notably, this submission
was filed on the same day Ericsson filed its interrogatory
response upon which TCL relies on as a waiver.
Even the court did not treat Ericsson as having waived
its jury trial right. In a January 30, 2017 final pre-trial
conference order, the court explicitly acknowledged that
“Ericsson has requested a jury trial of all issues” and that
it “overruled Ericsson’s request for a jury trial of all issues,
which request Ericsson hereby preserves.” J.A. 48694 (in-
ternal citation omitted). Ericsson renewed its objection to
the bench trial right before it commenced:
Your Honor, just an administrative point. Ericsson
just wants to make a non-waiver point. Of course,
we’re proceeding with the bench trial. We don’t
want to be deemed to have made an election or to
have waived our right to a jury trial as reflected in
our earlier motion which was denied.
J.A. 51642. In light of the record as a whole, we reject
TCL’s contention that Ericsson waived its jury trial right.
TCL COMMC’N TECH. v. TELEFONAKTIEBOLAGET LM 27
CONCLUSION
For the foregoing reasons, we hold that the district
court deprived Ericsson of its Seventh Amendment right to
a jury trial by deciding the legal relief of a release payment
for past unlicensed sales in a bench trial. We have consid-
ered the parties’ remaining arguments and find them un-
persuasive.
Accordingly, we vacate the district court’s determina-
tion of the release payment, including the underlying ques-
tion of whether Ericsson’s Option A and Option B offers
that include the release payment term are FRAND. We
also vacate the court’s determination that Ericsson’s offers
are not FRAND and its determination of prospective
FRAND royalty rates because both determinations were
predicated on common issues to the improperly decided re-
lease payment. Because the release payment will be re-
decided by the jury, we reverse the dismissal of Ericsson’s
patent infringement claims and TCL’s related counter-
claims of invalidity and non-infringement as no longer
moot. Finally, we remand all above determinations for fur-
ther proceedings consistent with this opinion.
VACATED-IN-PART, REVERSED-IN-PART, AND
REMANDED