FRAND in Japan

As I note in my forthcoming book Wrongful Patent Assertion, in 2014 a Grand Panel of the IP High Court held, in Samsung Elecs. Co., Ltd. v. Apple Japan Godo Kaisha, Judgment of May 16, 2014, 2013 (Ne) 10043, that the owner of a FRAND-committed SEP may abuse its rights by seeking injunctive relief against a willing licensee; and “[i]n a subsequent decision, Imation Corp. Japan v. One-Blue LLC, Tokyo Dist. Ct., Feb. 18, 2015, Case No. 2013 (Wa) 21383, the court held that the defendant (the manager/operator of a patent pool that included some SEPs) had engaged in unfair competition by sending a warning letter to three retailers threatening injunctive relief, because under the Samsung v. Apple decision, the act of seeking an injunction for the infringement of a FRAND-committed SEP against a willing licensee is an abuse of right.  The [latter] decision therefore appears to read Samsung v. Apple as holding that it is an abuse of right per se to seek injunctive relief against a willing licensee for the infringement of a FRAND-committed SEP.  Cf. Yuzuki Nagakoshi & Katsuya Tama, Japan Without FRANDS?  Recent Developments on Injunctions and FRAND-Encumbered Patents in Japan, 44 AIPLA Q.J. 243 (2016) (critiquing Samsung v. Apple for arguably creating such a per se rule and for ignoring, as part of the abuse of rights calculus, the rightsholder’s subjective intent; and proposing that Japanese courts hearing FRAND cases instead consider whether the rightsholder has satisfied its statutory duty to negotiate in good faith).”  Other than these two cases, however, to my knowledge there hasn’t been much any Japanese case law involving FRAND-committed SEPs, until last year when three new district court decisions—all involving the same plaintiff, Pantech Corp.—came out.  Two of these have recently made available in translation on the IP High Court’s website; the third, not yet.  They all appear to agree, however, that it is an abuse of right for the owner of a FRAND-committed SEP to seek injunctive relief against a willing licensee.

The first of the three, Pantech Corp. v. ASUS Japan Co., 2022 (Wa) 7976 (Tokyo Dist. Ct., Apr. 10, 2025), involves Japanese Patent No. 4982653, titled “Method of transmitting and an apparatus for transmitting ACK/NACK information and a method of transmitting and receiving and an apparatus for receiving ACK/NACK signals.”  The court concludes that ASUS’ products infringe and that the claims in suit are valid.  On the issue of remedy, however, the court states that “a FRAND-encumbered standard essential patent holder's act to demand an injunction against a standard essential patent implementer based on the standard essential patent is impermissible as an abuse of right, unless there is a special circumstance where the standard essential patent implementer has no willingness to obtain a license under FRAND terms” (p.25).  After a review of the parties’ negotiating history (pp. 25-30), the court concludes that the defendant was a willing licensee, stating:

the reason for which the Plaintiff and the Defendant failed to reach an agreement on a FRAND rate in spite of prior consultations relating to the abovementioned findings and settlement talks in this lawsuit is that the FRAND rates presented by both parties were far too divergent, as explained in detail later (No. 7). According to both parties' assertions mentioned above and the entire import of oral arguments, the cause for this divergence is considered to be as follows: in major countries in the world, the Unwired Planet v. Huawei judgment, as presented by the Plaintiff, and other court precedents on FRAND rate calculation methods have developed internationally in response to changes of the times; on the other hand, in Japan, there have been no court precedents based on the abovementioned international development for about 10 years following the Apple v. Samsung Grand Panel judgment, and also, even taking into account various circumstances that appeared in this case, a FRAND rate calculation method has not necessarily been established in Japanese business practice (p.31).

Citing article 102(3) of the Japanese Patent Act (on reasonable royalties) and the IP High Court’s 2019 judgment in NeoChemir (see my blog post here), the court then sets out principles for calculating the FRAND rate:

In light of the global nature and the enormous number of standard essential patents implemented in the manufacturing of products conforming to a standard, when determining a FRAND rate, it is necessary [i] to take into consideration a royalty rate set in the actual license agreement for the standard essential patent, or if it is indefinite, a global average royalty rate in the industry; [ii] to presume the individual values of all standard essential patents to be the same because it is practically difficult to find the individual values of the enormous number of patents, and to calculate the value of a single standard essential patent by dividing the value of all standard essential patents by the total number of standard essential patents, while ensuring that the total amount of royalty obtained through aggregation of royalty rates of the standard essential patents remains  within a reasonable scope; and [iii] to also take into consideration, in such a case, possible contributions to sales and profits if all standard essential patents are used in the product. Furthermore, [iv] as a FRAND rate should fundamentally be agreed upon globally as soon as possible through good-faith negotiations between a FRAND-encumbered standard essential patent holder and a standard essential patent implementer, under the literally fair, reasonable, and non-discriminatory terms, a reasonable FRAND rate should be determined by comprehensively taking into account the negotiation process between the parties and the standard essential patent implementer's willingness to obtain a license under FRAND terms, and other circumstances appearing in the lawsuit, from the viewpoint of facilitating the agreement (p.35).

Ultimately, the court calculates a royalty for the one patent in suit by multiplying the sales revenue from the defendant’s products (redacted) by the aggregate royalty burden for LTE-standard-related patents (which the court figures at 9% for LTE products, based on an analysis of findings made in Unwired Planet, TCL v. Ericsson, and Huawei v. Samsung, and 8% for 5G products (p.39)), and then dividing by the number of LTE-standard-related patents (which the court estimates to be 1,300, taken into account likely validity, etc., see pp. 40-41)).  The rate itself is redacted.

The second and third decisions are both actions by Pantech against Google Japan G.K.  I understand that both cases involve the same patent, Japan Patent No. 6401224 (“Method for mapping a physical hybrid automatic repeat request indicator channel”), but different accused products (the Google Pixel 7, since discontinued, and the Pixel 7a, respectively).  In the first of the two, 2023 (Wa) 70501 (Tokyo District Court June 23, 2025), a translation of which is available here, the Tokyo District Court agreed that a FRAND-committed SEP owner’s demand for an injunction “is impermissible as an abuse of right, unless there is a special circumstance where the standard essential patent implementer has no willingness to obtain a license under FRAND terms" (p.39).  The court nevertheless held that Pantech was entitled to an injunction because Google’s conduct during the course of a court-supervised settlement negotiation (occurring in July 2024) demonstrated that Google was an unwilling licensee.  In dicta, however, the court found no fault with Google’s pre-settlement negotiations behavior and thus would not have found Google unwilling on the basis of that conduct alone (see pp. 47-50).  In the second one, however—according to the commentary cited below, since a translation has not been uploaded yet—the Osaka District Court on July 10, 2025 concluded that Pantech was not entitled to an injunction, because Google had shown itself to be a willing licensee through the end date of negotiations the court took into account (November 30, 2023).  The commentaries below do not say anything about the Osaka court actually determining the FRAND royalty, and some more recent commentary indicates that by early January (with other cases involving newer models of Google phones pending) Pantech and Google had settled on global terms, following a recommendation by the Tokyo district court.

For commentary that was helpful in drafting this post, see Masachi Chucho, Pantech v. ASUS: A Recent FRAND Judgment from Japan (available here); Takeshi Komatani, Japan’s First SEP Injunction:  Pantech v. Google and the High Bar for Establishing Unwillingness (available on AIPPI’s website here); and Kenji Tosaki, Takahiro Hatori & Yujiro Fukuhara, The Japanese court first judgment to grant an injunction based on a FRAND-committed SEP (available on Chambers and Partners’ website here; original, longer version available here).   

Meanwhile, as discussed elsewhere (see, e.g., here, here, here, and here), in early 2026 the Tokyo District Court also issued two new documents, Guidelines for Patent Infringement Litigation Based on Standard Essential Patents and SEP Mediation Procedures.  I may have more to say about these in due time.   

UPC’s Hamburg L.D. Concludes that Infringing Offer Caused No Proven Damages

The decision is Fives ECL v. REEL GmbH, UPC_CFI_274/2023, issued on February 11, 2026.  The decision is the subject of a recent blog post on ip fray.  Last June, I blogged about an earlier decision (of the UPC Court of Appeal) in this dispute, writing that “the patent owner had obtained from a German national court a judgment of infringement, prior to June 1, 2023, and a declaration that the defendant would be liable for damages; but it thereafter pursued its damages claim before the UPC.  The UPC Court of Appeal held that the UPC was competent to hear the damages claim (but left open the question of whether national or UPC law would apply to that claim).”  The current decision holds that German domestic law applies to the damages claim, but that it wouldn’t matter in any event in view of the Intellectual Property Rights Enforcement Directive (paras. 100-10).  More interesting, however, is the court’s conclusion that, although the defendant was adjudicated to have made an infringing offer, it isn’t liable for any damages.  A copy of the original decision, in German, is linked to above; below, I use a machine translation that I have compared with the original.

The patent in suit is EP  c1 740 740 B1, for a “compact service module which is intended for electrolytic aluminium production plants.”  Plaintiff and defendant compete “in the market for special purpose cranes, which are used worldwide in various countries in aluminum furnaces as part of aluminum production” (para. 5).  In December 2016, the parties submitted competing bids for a project in Bahrain, which was to be built by Bechtel.  The first offers, dated December 2, were for twelve service modules and auxiliary bridges.  Defendant’s offer was higher than plaintiff’s.  Bechtel then requested that the parties provide a price “in the event these two parts were split and continued separately,” which the parties responded to on December 15.  Defendant offered a price reduction, while the plaintiff did not (para. 70).  Plaintiff didn’t get the contract; but then Bechtel decided to reopen the bidding process, and plaintiff submitted a new bid on February 21, 2017, which included a price decrease of €6,500,000.  Apparently plaintiff was then awarded the contract, but it (successfully) sued the defendant for having made an infringing offer, which it then followed up with this claim for lost profits.

The court rejects the claim for lost profits, for failure of proof as to amount and for lack of proof of causation.  From what I gather, the plaintiff didn’t proffer the December or February offers to the court (see paras. 18, 47), but rather sought to rely on evidence of (1) the defendant’s typical profit margin, according to the latter’s publicly available financial data from 2011-16, and (2) “projects implemented by the plaintiff in the past” (para. 51).  The former, however, is not sufficient proof, given that “defendant’s activities span multiple business segments,” and also that the submitted evidence reports the defendant’s gross margin (Bruttomarge), which may not be comparable to the profit margin for this project.  The latter as well is not sufficient, because the projects “predate the tender for the [present project] by eight to thirteen years,” “included contracts with a wide range of volumes,” and were reflective in part of both the greater market power enjoyed by the plaintiff at those earlier dates and a better economic environment generally for aluminum manufacturers and suppliers.  In addition, the court casts doubt on the technical advantage provided by the patented technology in comparison with alternatives (discussed further below), and concludes that in any event there is no evidence that any assumed advantage over the state of the art could justify the plaintiff’s alleged margin.  Moreover, the defendant’s bid included an “erection and installation concept” that Bechtel favored, to the point of requesting the plaintiff to include a similar concept in its proposal when bidding reopened—which “contradicts the assumption that the plaintiff would have prevailed in a hypothetical scenario without the defendant’s patent-infringing bid,” insofar as “the defendant had a competitive advantage over the plaintiff that was independent of the” machinery at issue (paras. 76-77).

Finally, we come to the causation issue.  The court begins this section by stating that it cannot “be ruled out that, even if the defendant had submitted an alternative offer that did not infringe the patent, the plaintiff would have had to reduce its offer of December 2/15, 2016” (para. 78).  Here, the analysis gets a bit confusing, with the court first seeming to indicate that the existence of a noninfringing alternative is irrelevant to the plaintiff’s entitlement to lost profits, and then appearing to walk it back:

79 As a general rule, the claim—in this case, the asserted loss of profits—cannot be countered by the defense of lawful alternative conduct (see BGH, GRUR 2024, 1201, para. 43 et seq. – Verdampfungstrockneranlage). According to the case law of the Federal Court of Justice (BGH), the defense that the damage would have occurred even if lawful conduct had been adopted may be relevant for the attribution of the damage. The relevance of the defense depends on the protective purpose of the respective infringed provision (BGH NJW 2017, 1104, para. 24; BGHZ 194, 194 = GRUR 2012, 1226, para. 35 – Flaschenträger).

 

80 In the case of a patent infringement, the defense that the same economic result could have been achieved through non-infringing acts cannot, in principle, lead to the exclusion of a claim for damages. A patent does not preclude third parties from competing with the right holder by offering non-infringing products. However, the offering and placing on the market of the protected subject matter is reserved to the right holder. A culpable infringement of this exclusive right must result in the infringer having to compensate for the resulting damage even if he could have offered other products. These principles also apply to the patent-infringing offering of a product.

 

81 These principles do not apply in the present case. This is because it is undisputed between the parties that the customer would always have requested a second offer in order to foster competition . . . .

 

82 If one therefore assumes that a non-infringing alternative offer must be included in the assessment, it cannot be definitively established that the plaintiff would certainly have been awarded the contract with its original offer.

The court then goes on to explain why the defendant’s Pavlodar model would have been both technically and economically more attractive than the proposals the plaintiff submitted in December 2016.  As a consequence, as stated above, the plaintiff fails to prove that it “would certainly have been awarded the contract with its original offer” (paras. 83-89).

I’ve noted (what I view as) similar inconsistencies in the German courts’ analyses of noninfringing alternatives before, for example in my June 2024 post on the Verdampungstrockneranlage decision cited above.  Maybe it’s fair to say, however, that under German law, the existence of a noninfringing alternative doesn’t necessarily preclude the plaintiff from recovering damages for infringement, but that the plaintiff still must present evidence as to the amount of those damages; and where, as here, it proceeds instead with an untenable lost profits theory, it gets nothing, though perhaps under other circumstances it would still be entitled a reasonable royalty—as may have been the case in Verdampfungstrockneranlage, where it is conceivable that there was some value to the defendant in making an infringing offer within Germany, as opposed to a noninfringing offer somewhere else, even if the end result would have been the same in that the defendant would have been awarded the contract (for a noninfringing project carried out outside of Germany).  If so, the German position may not be all that different from the U.S. position, under which (as reflected in cases such as Grain Processing Corp. v. Am. Maize-Prods. Co., 189 F.3d 1341 (Fed. Cir. 1999)), the existence of a noninfringing alternative means that the plaintiff can’t recover a lost profit (because it wouldn’t have made the allegedly forgone sales even absent the infringement), but the plaintiff may still recover a reasonable royalty reflecting the cost saving the defendant incurred by having used the patented technology over the noninfringing technology. 

In any event, my most recent effort to compare and contrast the law of noninfringing alternatives can be found at page 144 of my book Remedies in Intellectual Property Law, where I note that, although Canadian and French case law seems more or less consistent with the U.S. approach, the U.K. courts “continue to follow the House of Lords’ 1888 decision in United Horse-Shoe & Nail Co. v. John Stewart & Co., holding that the existence of noninfringing alternatives is irrelevant” to both lost profits and awards of infringer’s profits (though the U.K. courts recognize that noninfringing alternatives are relevant to reasonable royalties); and that “German courts also have held that the existence of noninfringing alternatives does not preclude an award of lost profits, though such evidence can affect the amount awarded,” citing both Verdampfungstrockneranlage  and Flaschenträger.

Federal Circuit Reverses Judgment Awarding Extraterritorial Damages

The case in Trustees of Columbia University v. Gen Digital Inc., precedential opinion by Judge Dyk (joined by Judges Prost and Reyna), published this morning.  This is a very complicated matter, involving among other things an inventorship dispute that devolved into a contempt order against trial counsel for the defense (which contempt order is reversed in a separate appellate decision also handed down today, which I need not address here), as well as two previous appeals on claim construction and validity (which I also will not address).  The current decision involves questions of patent eligibility, claim construction, and damages; and as is my typical practice for purposes of this blog, I will focus only on the last of these.

There are two patents in suit, both of which related “primarily to protecting computer systems from viruses and other malicious activity” (p.2).  The claims at issue consist of one system claim, two method claims, and a computer-readable medium claim, all of which allegedly are infringed by software marketed by the defendant under the Norton brand.  The district court denied a motion to dismiss for lack of patent eligibility.  Then jury then returned a verdict of willful infringement and awarded damages of $185,112, 727; the district court awarded enhanced damages and fees.  On appeal, the Federal Circuit reverses and remands for further proceedings on the issue of patent eligibility--but “[b]ecause other issues may arise on the remand,” the court addresses one remaining issue of claim construction as well as the issues pertaining to damages and fees.  As noted, I will address the damages and fees issues only.  The most interesting of these—at least in my view, since I’ve written a fair amount now about this topic—is whether, on the facts of this case and assuming the patents in suit are valid, the patentee is entitled to damages reflecting foreign sales of Norton software.

As readers may be aware, the general rule that seems to be emerging from Supreme Court, Federal Circuit, and district court case law over the last few years is that, although U.S. patents are territorial rights, if the defendant engages in the unauthorized manufacture, use, or sale of patented products in the United States, and this domestic infringement causes-in-fact and proximately causes either (1) the plaintiff to lose sales that the plaintiff would have made to foreign customers, or (2) the defendant to make sales abroad that the defendant otherwise would not have made, the plaintiff is entitled to recover, respectively, either its own lost profit on its lost foreign sales, or a royalty reflecting some portion of the profit the defendant would have expected to earn from the defendant's foreign sales, as of the date of the hypothetical ex ante bargain.  In view of this precedent, the district judge gave the jury the following instruction:

Columbia is entitled to damages based on sales to customers located outside of the United States if you find that the infringing product sold to those customers was made in or distributed from the United States, even if the infringing product is delivered to a customer and used by the customer outside the United States (p.23; emphasis added by the Federal Circuit).

The jury found that the defendant (referred to throughout the opinion as “Norton”) sold antivirus software abroad, and that “the infringing product” was made in or distributed from the United States.  (The jury did not find that the sales to foreign customers “substantially occurred in the United States,” (p.24 n.7)).  The appellate panel nevertheless agrees with Norton that “no reasonable jury could conclude that any infringing copies of Norton’s software that were sold to customers outside the United States were made in the United States or distributed from the United States” (p.24). 

This seems correct to me under the governing standards for determining what an infringing software product is, principally Microsoft Corp. v. AT&T Corp., 550 U.S. 437 (2006).  As the panel explains:

Microsoft establishes that software in the abstract—that is, software not physically encoded in a “tangible copy” like a CD or hard drive—is akin to a “blueprint” or “a schematic, template, or prototype.” Id. at 449–50. If someone abroad builds an infringing product based upon a blueprint that exists in the United States, for example, then the product was still made abroad. See id. at 442. So too, software is not tangible—or capable of infringing the asserted claims—until tethered in a particular copy of the software encoded in a computer-readable medium (p.25).

Applying this principle:

The system claim, ’322 patent, claim 27, includes a “processor.” Like the apparatus claim at issue in Microsoft, this claim is not infringed until a particular instance of software is installed onto a computer with a processor. See Centillion Data Sys., LLC v. Qwest Commc’ns. Int’l, Inc., 631 F.3d 1279, 1288 (Fed. Cir. 2011). Because the instances of software sold to customers located abroad are not installed on a computer in the United States, those instances were not made in or distributed from the United States.

 

The same conclusion follows as to the other claims asserted here. A method claim is only infringed when the claimed process is performed; it is not infringed by the mere existence of software that, if installed on a computer, could perform the method. See Ericsson, Inc. v. D-Link Sys., 773 F.3d 1201, 1219 (Fed. Cir. 2014). Because the infringing software is only capable of performing either of the claimed methods once installed on a computer, the versions installed abroad also cannot give rise to domestic infringement. In any event, “[t]here is no established recognition in patent law of direct infringement by ‘making’ a ‘method.’” See Brumfield, 97 F.4th at 879. The methods here were not “made” in the United States nor “distributed” from the United States.

 

This leaves only claim 11 of the ’322 patent, the computer-readable medium claim. Columbia argues that this claim must be treated differently, because it does not require that a particular version of software be first installed on a computer with a processor to be infringing. It is true that claim 11 does not require software to be installed on a device with a processor, but claim 11 does still require that the software be encoded in a particular “non-transitory computer-readable medium.” ’322 patent, claim 11. While a non-transitory computer-readable medium may be created on a server in the United States, that medium is not exported abroad. The computer-readable media sold to foreign customers are only created once the foreign computer encodes the software on its hard drive, which occurs outside the United States. These computer-readable media are—like the apparatuses in Microsoft—created outside the United States and therefore cannot be domestically infringing. Under the logic the Court applied in Microsoft, these cannot constitute infringing products that were made in or distributed from the United States (pp. 25-26).

Columbia tries a few additional arguments on appeal, but none of them work.  The one that might have worked, had it been presented at trial, was that “the jury could have found that the domestic infringement involved in creating its master copies, which enabled the foreign sales, were the cause of the foreign sales damages. However, the jury was not instructed, and Columbia did not seek an instruction, that they could grant a reasonable royalty for foreign sales based on this theory. We cannot reform the damages theory actually presented to the jury in favor of an alternative that was not, even if the alternative would have been legally valid. . . . We thus need not reach the question of whether Columbia’s theory of foreign damages was proper under the causation theory of Brumfield.” (p.25).  My initial reaction is that that theory probably wouldn’t have worked either, because the causal connection between the domestic manufacture of the master copies and the foreign sales is too tenuous to satisfy proximate causation, though I would want to know more about the underlying facts to assert that opinion with confidence.  (Alternatively, if the domestic manufacture of the master copies could have been outsourced, then in my opinion outsourcing should count as a noninfringing alternative, and any royalty awarded for the resulting foreign sales should reflect only the cost saving, if any, of domestic over foreign manufacture of the master copies.  Whether the courts would agree with me on this remains to be seen.)  The appellate court also rejects arguments that Norton could be liable as a joint infringer with the foreign customers, or that Norton could be liable under an inducement theory (pp. 27-28).

As for willfulness and enhanced damages, the court affirms the finding of willfulness, primarily on the basis of evidence that Norton was aware in advance of “‘the Columbia professors’ designs and work before the patents issued’ including the provisional application,” and the lack of evidence that, during the relevant time period, Norton was aware of and acted upon its subsequently asserted objectively reasonable defenses (pp. 21-22).  The court nevertheless vacates the district judge’s enhancement of actual damages (2.6 times the actual damages) and the award of attorneys’ fees, in part because the amount awarded and the finding of exceptionality were based on the vacated finding of contempt of court.  In addition, the case was close (on patent eligibility) and Norton’s assertion of allegedly “repetitive” arguments did not amount to litigation misconduct.

Federal Circuit Authorizes Royalty Calculation Based on Nonpatented Articles

I’ve been busy the last several days reviewing the page proofs for my forthcoming book, Wrongful Patent Assertion:  A Comparative Law and Economics Analysis (Oxford Univ. Press 2026), which is due out in late spring or early summer.  Now that I have some time to resume blogging, I’ll start by discussing a short (but precedential) Federal Circuit decision from last Friday, Exafer Ltd. v. Microsoft Corp. (opinion by Chief Judge Moore, joined by Judges Taranto and Stoll).  It presents an interesting question relating to damages calculation. 

Exafer owns two patents in suit relating to “systems and methods for optimizing communication paths between virtual network devices by controlling data forwarding rules at intelligent switches” (p.2).  Exafer claims that “Microsoft’s Azure Platform, and specifically the Azure Smart Network Interface Cards (SmartNICs) and Virtual Filtering Platform (VFP) Fastpath technology (Accused Features),” infringe the two patents.  Exafer’s damages expert Mr. Blok was prepared to present an opinion concerning the hypothetical royalty the parties would have agreed to ex ante, using as the royalty base the value of certain noninfringing virtual machines (VMs).  The theory is that Microsoft’s use of the patented technology enabled “Microsoft to reduce the central processing unit (CPU) usage in Azure servers, freeing up CPU cores to host additional VMs” (p.6); and that the value to Microsoft of using the patented technology is therefore the revenue derived from hosting those additional VMs.  The district court agreed with Microsoft’s argument that it was impermissible to use the noninfringing VMs as the royalty base, but the Federal Circuit reverses and remands.

I think the Federal Circuit got it right, though I can understand the appeal of Microsoft’s argument that the royalty should not be calculated using the value of some other, noninfringing product.  (Going back in time, one might perceive a similar perspective in cases such as Zenith Radio Corp. v. Hazeltine Rsch., Inc., 395 U.S. 100, 135 (1969), which held that setting royalty rates on the basis of the licensee’s sales of unpatented products constituted patent misuse (while also holding that, if the licensee is not coerced into taking unwanted patents, but instead agrees for convenience to take a portfolio of patents, the arrangement is not misuse).)  The premise that the royalty must be related to the use of the patented technology is of course correct, but I think the Federal Circuit is right in finding a sufficient causal connection between that use and the increase in the number of VMs Microsoft can host; and as long as the revenue derived from that increase is a type of benefit that Microsoft would have anticipated ex ante, it stands to reason that the amount Microsoft would have been willing to pay ex ante would have reflected that expected benefit.  This is essentially the court’s view, as I read it:

[Exafer’s technical expert] Dr. Congdon opined that the network optimization and efficiency improvements achieved by the claimed inventions “would translate to, among other benefits, the ability to operate more virtual machines on a single CPU or host (i.e., increasing virtual machine density). Accordingly, by increasing virtual machine density, Microsoft would be able to sell more virtual machines without the need for additional network infrastructure.” . . . Mr. Blok’s VM-hour royalty base captured this incremental benefit of being able to offer additional VMs due to operation of the Accused Features within the Azure Platform. . . . This methodology is tethered to the patented invention and does not expand Exafer’s patent monopoly to unpatented technology. Mr. Blok’s testimony therefore satisfies the admissibility standards of Rule 702 (p.8).

Put another way, as long as the additional revenue associated with hosting more VMs was, ex ante, a foreseeable consequence of the use of the patents in suit, a willing licensee would have taken that added benefit into account in determining how much it was willing to pay for a license.  By contrast, requiring that the royalty be limited to the immediate benefit of the use (perhaps the cost savings associated with reduced CPU usage for purposes of powering the Azure platform, without any consideration of the next-best use of those otherwise idle CPUs) strikes me as a formalistic constraint lacking in economic substance.  That said, if the actual benefit derived ex post from freeing up some of the CPUs were of a type that would not have been foreseeable ex ante, then it should be excluded from consideration; but that is not my understanding of the facts here.

The case does make me think about the connections between the hypothetical bargain construct; the situations in which it might be rational for courts to make use of ex post information (which Norman Siebrasse and I wrote about a few years back); and the doctrine of proximate cause, which limits damages to those that are, inter alia, foreseeable.  I may have more to say about this in a future post.

Herr, Alymov & Nothmann on Whether the UPC Can Set Global FRAND Rates

Jochen Herr, Nikita Alymov, and Martin Nothmann have published an article titled Can the UPC set global FRAND rates?, 1/2026 GRUR Patent 18-24.  Here is the abstract:

The Unified Patent Court (UPC) is emerging as a key forum for SEP and FRAND disputes, yet its authority to set FRAND rates remains only partly defined.  This article examines whether, and under what conditions, the IPC may determine global FRAND rates focusing on procedural hurdles such as the party disposition principle, judicial discretion, territorial scope and the Huawei/ZTE compliance.  Furthermore, a recent order by the Local Division Paris confirms jurisdiction for counterclaims but leaves critical questions unresolved including whether stand-alone FRAND rate-setting actions are admissible beyond counterclaims in infringement actions.  This article will shed light on how the UPC’s evolving role could reshape licensing practices and forum selection.

The authors begin with a brief survey of FRAND determinations (or non-determinations) in Germany, the U.K., the U.S., and China, before taking on the principal topic of whether the UPC has competence to engage in FRAND rate-setting.  As noted in the abstract, in October 2025 the Paris Local Division in Sun Patent Trust v. Vivo concluded that it had jurisdiction to consider Sun Patent Trust’s request that the court, as an incident to Sun’s infringement claim, whether its offer was FRAND or if not.  (That order is now before the UPC Court of Appeal.  As the authors note in the body of the article, the request is not technically a counterclaim, notwithstanding the description of it as one in the above abstract; and it is fairly limited in what it says, to wit "The claimant has merely anticipated the so-called 'FRAND defence' that the defendant is raising against this type of infringement action. This FRAND defence falls within the jurisdiction of the UPC, according to a consistent UPC CFI caselaw which indicates that the FRAND issue can be dealt with incidentally by the UPC . . . . [A] discussion of FRAND terms, at least as a defence raised by VIVO at the time of the statement of defence, will undoubtedly follow, as anticipated by both parties. In the present case, all facts and arguments relevant to the determination of FRAND terms, whether admissible or not, will have to be debated by the defendants.")  The article then discusses the UPC’s decisions in Panasonic/OPPO and Huawei/Netgear, both of which concluded that they were competent to consider a FRAND rate-setting counterclaim, but did not actually do so after finding the implementers to be unwilling licensees.  The authors also discuss the possibility of stand-alone FRAND rate-setting actions in the UPC, but describe it as “problematic” in view of the various legal and practical obstacles that would have to be overcome.  

EU Requests WTO Panel to Determine Legality of Global FRAND Determinations in China

February was an unusually busy month for me, and my week-long bout with COVID didn't help, so I am behind schedule in blogging about recent events of relevance to the world of patent remedies.  One of the biggest of these was the European Union’s announcement on February 12 that it would be requesting the establishment of a WTO panel to determine whether China’s practice of establishing global FRAND royalties without consent of both parties violates the TRIPS Agreement.  The request for establishment of a panel in DS632 China-Worldwide Licensing Terms for Standard-Essential Patents is available here, and the EU's brief summary of the case here.  The WTO site for the case is here.

As previously noted on this blog, in January 2025 the EU instituted consultations with China concerning the issue of global FRAND royalties.  In addition, in July 2025 the EU prevailed in its other WTO dispute with China (DS611-Enforcement of Intellectual Property Rights), concerning China’s antisuit injunction policy, when an arbitration panel (assembled in the absence, for several years now, of a functioning WTO appellate body) concluded (contrary to the initial panel decision) that that policy violated TRIPS articles 28.1 and 28.2 as read in light of article 1.1, because it “frustrate[d] the exercise of the exclusive right of a patent owner to prevent the use of the subject of its patent without its consent” and “alter[ed] the negotiating position of SEP holders in a fundamental way.”  Much the same logic is expressed in the EU’s current request, along with additional reliance on Paris Convention 4bis (which is incorporated by reference into the TRIPS Agreement).  In particular, the EU argues that the challenged measure (of setting global FRAND rates without consent of both parties) violates the following:

Article 28.1, read in conjunction with Article 1.1, first sentence, of the TRIPS Agreement, because China's measure has as its effect to restrict the ability of the owner of a non-Chinese patent to exercise the exclusive rights conferred on it by other WTO Members under Article 28.1 of the TRIPS Agreement, i.e., to prevent third parties not having the patent owner’s consent from making, using, offering for sale, selling, or importing the patented product.

 

Article 28.2, read in conjunction with Article 1.1, first sentence, of the TRIPS Agreement, because China's measure has as its effect to restrict the ability of the owner of a non-Chinese patent to meaningfully exercise its right to conclude licensing contracts, as conferred in the territory of other WTO Members under Article 28.2 of the TRIPS Agreement, by freely negotiating and concluding licensing contracts for the non-Chinese patents.

 

Article 4bis of the Paris Convention (1967), as incorporated into the TRIPS Agreement by virtue of Article 2.1 of the TRIPS Agreement, because China’s measure undermines the principle of territoriality and restricts the possibility for the parties subject to a decision rendered in China to start or continue proceedings before the courts of the WTO Member that granted the non-Chinese patents, and thus for the courts of that WTO Member to adjudicate actions relating to those patents in their respective jurisdictions.

Two obvious points to note.  One is that, although the EU is challenging China’s policy only, it would seem that if the EU’s position turns out to be sound, the U.K.’s policy of establishing global FRAND rates without consent of both parties would be equally vulnerable.  Second, if the EU’s position on Paris Convention 4bis is sound—and there is language in DS611 that is consistent with that position, as I noted here—wouldn’t that place the CJEU’s decision in BSH v. Electrolux in jeopardy as well, to the extent that decision appears to contemplate that courts in EU member states may adjudicate patent infirngement claims arising under non-EU member state law (as discussed, e.g., here and here?)