Microsoft Corp. v. Motorola

Motorola, Inc. and its affiliates (collectively, Motorola) (defendants) owned two patent portfolios that were subject to reasonable and nondiscriminatory (RAND) agreements. Under a RAND agreement, a patent holder could not refuse a license to a manufacturer who committed to pay the RAND rate. Motorola sent Microsoft Corporation (plaintiff) two letters offering to license the portfolios at a particular price. Microsoft, a third-party beneficiary of the RAND agreements, filed a breach-of-contract action alleging that the letters breached Motorola’s RAND obligations. Motorola filed a separate patent-infringement suit against Microsoft that was consolidated with the breach-of-contract action. Motorola also filed patent-infringement suits against Microsoft with the International Trade Commission and a German court, seeking injunctions against sales of Microsoft’s allegedly infringing products. Microsoft amended its complaint to assert that Motorola’s filing of injunctive actions constituted a continuing breach of Motorola’s obligations under the RAND agreements, and the district court stayed all the patent-infringement claims in the consolidated cases pending resolution of the RAND issues. Before proceeding to a jury trial, the district court conducted a bench trial to determine a RAND rate for the patents at issue. To calculate the RAND rate, the court set up a hypothetical negotiation between the parties to approximate the royalty rates to which they would have agreed, considering multiple factors, including the present-day value of the Motorola patents to Microsoft. The jury ultimately returned a verdict in favor of Microsoft. Motorola appealed, arguing, among other things, that the district court’s RAND-rate analysis was flawed.