Calculating RAND Rates for Breach of Contract Claims

The courts may deem it necessary to quantify a RAND rate in breach of contract claims that arise over RAND obligations. This occurred, for example, in a dispute between Microsoft Corp. and Motorola, Inc.

In November 2012, Judge Robart conducted a bench trial to determine a RAND rate and range for Motorola's H.264 and 802.11 patents. Such determination was necessary, the court reasoned, because without a clear understanding of what RAND means, it would be difficult or impossible to figure out if Motorola breached its obligation to license its patents on RAND terms.

Microsoft Corp. v. Motorola, Inc., 795 F. 3d 1024, 1033 (9th Cir. 2015).

Appeals that arise out of breach of contract matters may fall to regional appeals courts rather than to the Federal Circuit.

On Microsoft's motion, the Federal Circuit transferred the appeal to this court. … [B]ecause our jurisdictional determination on the interlocutory appeal was made knowing the RAND bench trial would occur and the Federal Circuit's decision to transfer the case was made after the bench trial, we conclude that no changed circumstances are present. As the earlier jurisdictional determinations were not clearly erroneous, we have jurisdiction.

Microsoft Corp. v. Motorola, Inc., 795 F. 3d 1024, 1034-35 (9th Cir. 2015).

Regional circuit courts may look to precedent at the Federal Circuit in adjudicating the calculation of RAND rates.

[O]utside the RAND context, the Federal Circuit has recognized that, although courts often parrot all 15 factors to the jury, some of the factors clearly are not relevant to every case. Id. And in the context of RAND agreements, the Federal Circuit in Ericsson cited Judge Robart's opinion in support of the proposition that many of the Georgia-Pacific factors are contrary to RAND principles.

Microsoft Corp. v. Motorola, Inc., 795 F. 3d 1024, 1041 (Fed. Cir. 2015).

There may be unique considerations around timing when applying the hypothetical negotiation framework to quantify a RAND royalty for a breach of contract claim.

Given Microsoft's argument that Motorola's breach was ongoing, the district court could reasonably have concluded that it was appropriate to include the present-day value of Motorola's SEPs as a factor in calculating the RAND rate-and-range for use in the breach-of-contract proceeding. … Motorola acknowledges, the infringement at issue in this case is Motorola's breach of contract, not Microsoft’s use of Motorola’s patents.

Microsoft Corp. v. Motorola, Inc., 795 F. 3d 1024, 1041-42 (Fed. Cir. 2015).

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