## Facts

- Commonwealth Scientific and Industrial Research Organisation (CSIRO) owned U.S. Patent No. 5,487,069, directed to wireless LAN technology addressing multipath interference and used in Wi‑Fi (IEEE 802.11) implementations.
- Cisco Systems, Inc. sold products accused of infringing the patent; the parties stipulated that Cisco would not contest infringement or validity, leaving only damages for trial.
- CSIRO previously licensed the patent to Radiata, Inc. under a Technology License Agreement (TLA) with chip-based, tiered royalties; Cisco later acquired Radiata, assumed the TLA, and paid royalties until 2007.
- After Cisco stopped paying under the TLA, CSIRO used a “rate card” proposal in licensing discussions with Wi‑Fi implementers, though no license was executed on those proposed terms.
- Following a bench trial in the Eastern District of Texas, the court awarded CSIRO $16,243,067 in reasonable royalty damages.
- Cisco appealed, challenging only the reasonable-royalty methodology and resulting damages figure for a patent treated as standard-essential in the Wi‑Fi context.

## Issues

1. Whether a reasonable-royalty analysis was required to begin with the smallest salable patent-practicing unit (the wireless chip) as the royalty base.
2. Whether the damages analysis for a standard-essential patent had to expressly exclude value attributable to the standard’s adoption (lock-in/standardization value) and reflect the patented technology’s ex ante incremental value.
3. Whether the district court clearly erred by substantially discounting the probative value of the Radiata/Cisco TLA as a comparable license.

## Decision

- The Federal Circuit vacated the damages judgment and remanded for recalculation.
- The court held that reliance on the parties’ real-world licensing discussions and a device-level royalty structure was not, by itself, contrary to damages law; a chip-level base is not mandatory in every case.
- The court held that the district court erred by failing to account for the patent’s standard-essential status and by not adequately separating the invention’s value from value derived from inclusion in the standard.
- The court held that the district court gave insufficiently grounded reasons for discounting the Radiata/Cisco TLA, a license involving the same patent and the accused infringer, and directed that it be treated as an important benchmark on remand.

## Legal Principles

- A reasonable royalty must reflect the incremental value the patented invention contributes to the accused products, with apportionment achieved through the royalty base, the royalty rate, or both.
- The smallest salable patent-practicing unit is an evidentiary and apportionment tool, not a rigid starting point required in all reasonable-royalty calculations; the key concern is avoiding overcompensation and, in jury cases, avoiding inflationary effects from an unduly large base.
- For standard-essential patents, the reasonable-royalty analysis must exclude value attributable to the standard’s adoption and focus on the patented feature’s ex ante value relative to alternatives before standardization.
- Comparable licenses—especially those covering the same patent and involving the same accused infringer—are highly probative and should be incorporated into the Georgia-Pacific analysis with appropriate adjustments for differing circumstances.

## Conclusion

The Federal Circuit required a recalculation of CSIRO’s reasonable royalty because SEP damages must avoid capturing standardization value and must meaningfully account for closely comparable, patent-specific licensing evidence, while confirming that damages law does not compel a smallest-unit royalty base in every case.


Commonwealth Scientific & Industrial Research Org. v. Cisco Sys., Inc., 809 F.3d 1295 (Fed. Cir. 2015)