United States Court of Appeals
for the Ninth Circuit
a Washington Corporation,
MOTOROLA, INC.; MOTOROLA MOBILITY, INC.;
and GENERAL INSTRUMENT CORPORATION,
Appeal from the United States District Court
for the Western District of Washington at Seattle
BRIEF OF AMICUS CURIAE PUBLIC KNOWLEDGE IN SUPPORT OF APPELLEE
The controversy in this case is over a unique type of contract, an agreement between a technology-inventing company that proposed a technology standard and the standard-setting organization that adopted the standard. The contractual subject matter is not performance of services or shipment of goods, but rather a promise by the company to license its patents to others on fair, reasonable, and non-discriminatory terms. The beneficiaries are third parties external to the agreement, including the party enforcing that contract today.
Such a contract, called FRAND after the promised licensing terms, strongly implicates the public interest. The promise is made to the public, the beneficiary is the public, and the public is charged with enforcing the terms. It is fully appropriate to interpret that contract in view of the public interest.
This is precisely what the district court did, and insofar as it did so, the district court should be affirmed. In particular, the district court identified two principles that account for this public interest.
First, the court considered the problem of patent holdup, which simply describes a species of monopolistic imbalance of market power that occurs with technology standards. Second, it recognized the risk of royalty stacking, a problem of overvaluation of a single patent when that patent is but one of many covering a technology standard. Patent holdup and royalty stacking account for significant public interest concerns at play with FRAND agreements, and it was correct for the district court to account for them.