Realtek Semiconductor Corp. will pay LSI a 0.12 percent royalty for U.S. Patent No. 6,452,958 and a 0.07 percent royalty for U.S. Patent No. 6,707,867, according to the decision.
It’s the first time in California a jury has been called upon to set the licensing terms for standard-essential patents, which cover popular technology that is widely used. In LSI’s case, its patents cover the technology that enables Wi-Fi connectivity.
“Not only is this the first trial in which district court jurors have determined the RAND rate for a patent, we believe these royalties are the lowest ever to be set for comparable technologies related to declared standard-essential patents,” Steven S. Baik, attorney for Realtek, said in a statement Thursday.
The jury finding follows a decision in May in which U.S. District Judge Ronald M. Whyte ruled that LSI had initiated a complaint with the U.S. International Trade Commission only to gain leverage in its royalties dispute.
Judge White found that LSI had sued at the ITC in an attempt to force Realtek, a Wi-Fi chipmaker suing for breach of contract, to pay higher royalties for the standard-essential patents.
The judge said that LSI had violated its contractual nondiscriminatory obligations with the Institute of Electronics Engineers by instigating an ITC investigation into Realtek's alleged infringement of the patents before making a reasonable licensing offer to the Taiwanese company.
Realtek claimed LSI's initial royalty offer was unreasonable because it would require Realtek to spend more on royalties than it would be able to recoup by selling its products.
LSI reduced what it was seeking, asking the jury for 0.185 percent for each patent, or 0.37 for both in a package, according to court records.
But Realtek argued that the patents added little innovation to Wi-Fi standards and weren’t worth even that much. It was hoping for an even steeper discount than it won in Wednesday’s decision.
The patents were designated as essential to the Institute of Electronics Engineers' standards for wireless Internet connectivity.
LSI has enforceable contracts with the institute to license the patents on reasonable and nondiscriminatory terms so that third parties can meet the connectivity standards, court documents said.
In October 2002, LSI told Realtek it was willing to offer a 5 percent royalty rate on the patent licenses, but the parties stopped talking after Realtek asked for more information regarding allegations that it was infringing the patents with its Wi-Fi chips.
More than nine years later, LSI sent Realtek a cease-and-desist letter, and less than a week after that, it filed an ITC complaint seeking a limited exclusion order and an injunction that would bar Realtek from selling the Wi-Fi chips in the U.S., according to court documents.
Realtek then asked LSI for a RAND license proposal but claimed the proposal LSI gave it was unreasonable because the rate reflected the total value of the end product, as opposed to the value of the component parts, such as the Wi-Fi chips that Realtek supplies.
In June 2012, Realtek argued to a California federal judge that LSI breached its RAND licensing obligations by filing its ITC complaint before approaching Realtek with a reasonable licensing offer, court documents said. Realtek said that LSI couldn't enforce its patents against Realtek without first providing a reasonable RAND license offer and that the judge should determine a fair royalty rate.
Representatives for LSI did not immediately respond to requests for comment Thursday.
Realtek was represented by Reed Smith LLP.
LSI was represented by Kilpatrick Townsend & Stockton LLP.
The case is Realtek Semiconductor Corp. v. LSI Corp. et al., case number 5:12-cv-03451, in the U.S. District Court for the Northern District of California.
--Additional reporting by Dan Prochilo and Kurt Orzeck. Editing by Kat Laskowski.
