## Facts

- Innovatio IP Ventures, LLC acquired patents alleged to be essential to the IEEE 802.11 (Wi‑Fi) standard and asserted them against numerous commercial end users operating Wi‑Fi networks.
- Wi‑Fi equipment manufacturers (including Cisco, Motorola Solutions, SonicWALL, Netgear, and Hewlett‑Packard) brought declaratory judgment claims disputing infringement and validity and were involved in the consolidated proceedings.
- The cases were centralized in multidistrict litigation in the Northern District of Illinois.
- The court previously determined that many asserted patent claims were standard-essential and subject to commitments to license on fair, reasonable, and non-discriminatory (FRAND) terms.
- Before claim construction and any final adjudication of infringement or validity, the court held a bench trial limited to determining a FRAND royalty, assuming infringement and validity solely for this damages phase.
- Innovatio sought substantially higher per-unit royalties, including theories tied to end products and end-user usage, rather than the Wi‑Fi component.

## Issues

1. What FRAND royalty should apply to Innovatio’s Wi‑Fi standard-essential patent portfolio under a hypothetical negotiation framework.
2. How to apportion value to the patented contribution to the 802.11 standard while avoiding compensation for unpatented features and avoiding royalty stacking.
3. Whether Innovatio’s proposed royalty approaches were inconsistent with FRAND commitments and the economic value of its incremental contribution to the standard.

## Decision

- The court determined a single FRAND royalty for Innovatio’s portfolio to be assessed on a per-unit basis at the Wi‑Fi chip level (the smallest salable patent-practicing unit).
- The court set the FRAND rate at $0.0956 per Wi‑Fi chip.
- The court rejected Innovatio’s higher royalty demands as inconsistent with FRAND constraints, apportionment principles, and the need to prevent excessive cumulative royalties for standard implementation.
- The court’s order provided a damages benchmark for the consolidated cases, without finally deciding infringement or validity.

## Legal Principles

- A FRAND commitment constrains the patent damages hypothetical negotiation and requires adjustment of the Georgia-Pacific analysis to avoid awarding value attributable to standard adoption or hold-up power.
- Patent damages must be apportioned to the value of the patented technology; for complex products, a reasonable royalty base generally should use the smallest salable patent-practicing unit rather than the entire end product.
- For standard-essential patents, a FRAND royalty should reflect the ex ante incremental value of the patented technology over available alternatives at the time the standard was adopted.
- Courts may consider royalty stacking risk—excessive aggregate royalties demanded by multiple SEP holders—as a constraint when setting a portfolio FRAND rate.
- Comparable licenses may inform FRAND valuation, but agreements reached under litigation pressure may be discounted as reflecting leverage rather than FRAND value.

## Conclusion

The court set a chip-level FRAND royalty of $0.0956 per Wi‑Fi chip for Innovatio’s 802.11 standard-essential patents, applying modified Georgia-Pacific reasoning, strict apportionment to the smallest salable patent-practicing unit, and an ex ante incremental-value approach designed to limit hold-up and royalty stacking.


In re Innovatio IP Ventures, LLC Patent Litig., 956 F. Supp. 2d 925 (N.D. Ill. 2013)