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IN THE UNITED STATES DISTRICT COURT

FOR

THE NORTHERN DISTRICT

OF

ILLINOIS EASTERN DIVISION In re INNOV A TIO IP VENTURES, LLC PATENT LITIGATION ) ) ) ) THIS ORDER APPLIES

TO

ALL CASES ) )

M L

Docket No. 2303 Case No.

11

C 9308 MEMORANDUM OPINION, FINDINGS, CONCLUSIONS, AND ORDER JAMES

F

HOLDERMAN, District Judge: Plaintiff and patent-owner Innovatio

IP

Ventures, LLC ( Innovatio ) has sued numerous coffee shops, hotels, restaurants, supermarkets, large retailers, transpmtation companies, and other commercial users

of

wireless internet technology located throughout the United States (collectively, the Wireless Network Users ). Innovatio alleges that the Wireless Network Users provide wireless internet access to their customers

or

use it to manage internal processes, and

by

doing so infringe various claims

of

twenty-three patents owned

by

Innovatio. (Dkt. No. 198; Dkt. No. 451.)

1

Cisco Systems, Inc., Motorola Solutions, Inc., SonicWALL, Inc., Netgear, Inc., and Hewlett-Packard Co. (collectively, the Manufacturers ) each manufacture electronic devices used

by

the Wireless Network Users. (Dkt. No. 819, Ex.

~

10.) The Manufacturers have filed declaratory judgment actions against Innovatio seeking a declaration that the Manufacturers'

1

The twenty-three patents that Innovatio has asserted in this action are: U.S. Patent 5,295,154, U.S. Patent 5,428,636, U.S. Patent 5,504,746, U.S. Patent 5,546,397, U.S. Patent 5,740,366, U.S. Patent 5,844,893, U.S. Patent 5,940,771, U.S. Patent 6,374,311, U.S. Patent 6,665,536, U.S. Patent 6,697,415, U.S. Patent 6,714,559, U.S. Patent 6,826,165, U.S. Patent 7,013,138, U.S. Patent 7,107,052, U.S. Patent 7,386,002, U.S. Patent 7,457,646, U.S. Patent 7,535,921, U.S. Patent 7,536,167, U.S. Patent 7,548,553, U.S. Patent 7,710,907, U.S. Patent 7,710,935, U.S. Patent 7,873,343, and U.S. Patent 7,916,747.

Case: 1:11-cv-09308 Document #: 975 Filed: 10/03/13 Page 1 of 89 PageID #:41544

products, and the networks or systems

o

which those products are a part, do not infringe Innovatio's patents, and that Innovatio's patents are invalid.

See

Dkt. Nos. 431, 442;

see also

2

CV 426, Dkt. No.

;

2

CV 2773, Dkt. No. 1.) Innovatio, in tum, has alleged that the Manufacturers all infringe the same claims

o

the twenty-three patents Innovatio has asserted against the Wireless Network Users. (Dkt. Nos. 311-314.) All the pending cases and the parties thereto were transferred for pretrial coordination before this court by the Judicial Panel on Multidistrict Litigation in this MDL case, No. 2303. (Dkt. No. 1.) For ease

o

reference (and ignoring that some

o

them are also declaratory judgment plaintiffs), the court will refer to the Wireless Network Users and the Manufacturers collectively as the Defendants.

Follo :ving disco rery

but

before claim constrtlction the parties

nd

the court

agreed

th t

the best course toward resolving the parties' disputes would be

to

pause and evaluate the potential damages available to Innovatio

i

the Defendants are found to infringe the claims

o

Innovatio's patents.

See

Dkt. No. 614 ( 2/21/13 Tr. ) at 24:6-26:18.) The court and all parties agreed to address damages at this stage

o

the litigation, before a determination on the questions

o

validity and infringement. The court hopes that by doing so, the possibility

o

settlement will be enhanced because the parties will be better able to evaluate the potential risks and benefits

o

expending additional resources in the litigation. The damages available to Innovatio in this case tum on the determination

o

a single set

o

issues relating to the 802.11 wireless standard established by the Institute

o

Electrical and Electronics Engineers ( IEEE, pronounced eye-triple-ee ). The prior owners

o

all

o

Innovatio's patents contractually agreed with the IEEE to license any patents that were essential to the operation

o

the 802.11 wireless standard on reasonable and non-discriminatory ( RAND ) terms. According to the Defendants, Innovatio's recovery in this case is therefore

2


limited to a RAND licensing fee for the patents-in-suit. The parties were entitled to a

jury

determination

of

damages, including the effect

of

Innovatio's RAND obligation, but both sides have waived their

jury

trial right and consented to this court's determination

of

the disputed damages questions.

See

Dkt. No. 600, at 1.) The pmties agreed that many

of

Innovatio's asserted patent claims were essential to practice the 802.11 standard under the definition

of

essentiality provided in the IEEE bylaws. Following a two-day bench trial on July

8

and 19, 2013, the court determined in a Memorandum Opinion on July 26, 2013, that all

of

the other 168 patent claims Innovatio asse1ts, as to which the pmties disputed essentiality, were also essential to the operation

of

the 802.11 standard.

n

re Innovatio IP Ventures,

LL

Patent Litig.,

MDL

2303, 2013 WL 3874042 (N.D. Ill. July 26, 2013) ( July 26 Order ). Accordingly, for purposes

of

this proceeding all

of

Innovatio's asserted patent claims are essential to the 802.11 standard, and all are therefore subject to the RAND obligation.

On

September 9 through 12 and 17 through 20, 2013, the court held another bench trial at which the parties presented evidence regarding the RAND rate to which Innovatio is entitled, and limited,

if

it shows that its patents are infringed. The parties agreed at the beginning

of

the trial that the court would determine only a RAND rate for infringement

oflnnovatio s

patents by the Manufacturers, and not

by

the Wireless Network Users. (Trial Tr. 8-10.) The court therefore severed any remaining issues regarding a RAND rate for infringement

by

the Wireless Network Users to address at a later time.

( d.

at 10:8-10.) Accordingly, the RAND rate the court detennines in this trial applies only to the Manufacturers. This Memorandum Opinion and Order constitutes the

comt s

findings

of

fact and conclusions

of

law.

At

the trial, Innovatio presented the testimony

of

five experts: Dr. David Teece, a 3
