To make sure the world’s various and sophisticated electronic devices can all work together, global standards-setting organizations (such as the International telecommunications Union and the Institute of Electrical and Electronics Engineers) require member companies to license “essential” patents at“reasonable and non-discriminatory,” or RAND, rates.
In a new case that pits Microsoft against Motorola, the parties have asked for a judicial accounting of a RAND royalty. According to Microsoft’s team of experts, the proper framework for determining a RAND royalty rate is an “ex ante, multi-lateral negotiation” involving full participation of essential patent holders as well as all potential implementers. On the other side, Motorola’s expert maintains that international standards clearly state that RAND license agreements are “bilateral in nature, such that they occur between only the patentee and the implementer.”
Not your typical Daubert case. At the outset, the federal district court noted the lack of any precedent on determining RAND rates and ranges. Moreover, although academic and standard-setting sources have discussed the importance of RAND rates and industry standards, the court said, “limited publication exists on the methodology a court should employ to determine a RAND royalty rate which in some way reconstructs the negotiation that would have taken place between Microsoft and Motorola.”
In the end—and citing the adaptability of the Daubert standard to new technical and scientific areas—the court permitted both parties’ experts to present their respective opinions at trial. Read the complete digest of Microsoft Corporation v. Motorola, Inc., 2012 LEXIS 152244 (Oct. 22, 2012), in the January 2013 Business Valuation Update; the court’s opinion will be posted soon at BVLaw. Note: Since that decision, the court held the RAND hearing and took the issue under advisement; according to its most recent ruling denying Motorola’s request for an injunction, it will issue a written order regarding a RAND rate and range in the near future. Stay tuned …