A FRAND Encumbrance May Not Necessarily Dampen Damages Under 35 U.S.C. § 284

Patentees (and litigation funders) sometimes worry that a FRAND encumbered patent will necessarily command a lower damages figure under 35 U.S.C. § 284 than a non FRAND-encumbered patent.  Not so, for a few reasons:

1. A FRAND rate arguably only applies to a license (ex post release of future liability) not damages (remedy for ex ante infringement). For example, FRAND provisions say things like “[patentee must] grant a license under reasonable rates to an unrestricted number of applicants on a worldwide basis with reasonable terms and conditions that are demonstrably free of unfair discrimination.” So suing to recover a reasonable royalty doesn’t necessarily violate a FRAND commitment.  See Atlas Global v. TP Link, 2:21-cv-00430-JRG-RSP (ED Tex. July 28, 2023) (“The [IEEE] Letter of Assurance does not require a license or specific terms be offered before filing suit . . . [it] requires a commitment to grant a license under reasonable rates to an unrestricted number of applicants on a worldwide basis with reasonable terms and conditions that are demonstrably free of unfair discrimination.”); see also Ericsson Inc. v. D-Link Sys., Inc., No. 6:10-CV-473, 2013 WL 4046225, at *25 (E.D. Tex. Aug. 6, 2013) (“A patent holder does not violate its RAND obligations by seeking a royalty greater than its potential licensee believes is reasonable … Instead, both sides’ initial offers should be viewed as the starting point in negotiations.”).  

2. Entitlement to FRAND is an affirmative defense that may be waived if not pled. See Wi-Lan Inc. v. HTC Corp., No. 2:11-CV-68-JRG, 2013 WL 8811318, at *4 (E.D. Tex. Oct. 11, 2013) (holding that FRAND is an affirmative defense for which “Defendants have the affirmative burden of proof”); see also 3G Licensing, S.A., Koninklijke KPN N.V., Orange, S.A., v. HTC Corporation, No. 1:17-cv-00082-LPS (D. Del., Oct. 2, 2020). 

3. Entitlement to a FRAND rate may require the potential licensee to concede essentiality. See HTC Corp. v. Telefonaktiebolaget LM Ericsson, 12 F.4th 476, 481 (5th Cir. 2021) (“Companies seeking to license under these terms become third-party beneficiaries of the contract between the standard-essential patent holder and the standard setting organization. They are thus enabled to enforce the terms of that contract”); see also 3G Licensing, S.A., Koninklijke KPN N.V., Orange, S.A., v. HTC Corporation, No. 1:17-cv-00082-LPS (Delaware, Oct 2, 2020) (finding that alleged infringed failed to analyze infringement of the standard or essentiality, which is a necessary precondition to entitlement to a FRAND rate). 

4. Entitlement to a FRAND rate arguably requires the licensee to be “willing.” Particularly when there is a strong willfulness case, there is a decent argument that a licensee can’t claim entitlement to a FRAND rate as a nominal third-party beneficiary of a contract that it is arguably repudiating.  See In re Qualcomm Litig., 2019 WL 7834768, at *7 (S.D. Cal. Mar. 20, 2019) (finding unwilling licensee not entitled to a FRAND rate).