On May 20, 2013, the US District Court for the Northern District of California issued an order in Realtek Semiconductor Corp. v. LSI Corp., finding on summary judgement that the defendants, LSI Corporation and Agere Systems LLC, breached their obligations to license certain patents to the plaintiff, Realtek Semiconductor Corporation, on reasonable and nondiscriminatory (RAND) terms and awarding a preliminary injunction barring any relief pertaining to such patents that the defendants may obtain from the US International Trade Commission (ITC).

The defendants are the owners of two patents that they have designated are essential to the standard for wireless internet connectivity known as "WLAN," "Wi-Fi" or "802.11" and have committed before the Institute of Electronics' Engineers (IEEE) to license on RAND terms. Realtek designs and supplies circuits that include WLAN technology.

This case arose when the defendants contacted Realtek and asked it to take a license to certain patents, including the wireless standard patents, and offering certain royalty terms. When Realtek failed to take a license, the defendants alleged infringement and, less than a week later, filed a complaint in the ITC against Realtek and others seeking:

Thereafter, when Realtek requested a license on RAND terms, the defendants offered a license that Realtek contends is unreasonable because it is based on the total value of the end product, rather than the parts supplied by Realtek. According to Realtek, the value of the license would exceed the selling price of its products.

Realtek filed an action before the Northern District of California for breach of contract, a declaratory judgment and other claims and, after prevailing on a motion to dismiss, filed this motion for partial summary judgment on its contract claims and to enjoin the defendants from enforcing any relief obtained from the ITC.

The district court found that the defendants failure to offer Realtek a RAND license before initiating its ITC Section 337 action to be a per se violation of its licensing obligations. In particular, the defendants entered into a binding agreement with the IEEE to license their patents on RAND terms and Realtek was a beneficiary of that arrangement. The district court found the act of seeking injunctive relief to be incompatible with the promise to the license the patents on RAND terms.

The court noted that its decision was consistent with the recent US Court of Appeals for the Ninth Circuit's opinion in Microsoft Corp. v Motorola, where the Ninth Circuit affirmed the district court's grant of a preliminary injunction preventing Motorola from enforcing a standard-patents-related injunction it obtained against Microsoft in a German court. In that case, Motorola sought an injunction after offering Microsoft a license that Microsoft found unreasonable.

In the present case, the district court found that as in Microsoft:

In other circumstances, where the accused infringer refuses to accept a RAND license, the court noted that an injunction in favor of the patent owner may be warranted. However, in this case, Realtek was willing to take a RAND license, so long as it could reserve its ability to defend itself against the plaintiff's infringement claims in the ITC.

The district court then granted Realtek's request to enjoin any relief obtaining by the defendants until the district court fully determines the scope of the defendants' RAND obligations. Among other factors, the district court remarked that the preliminary injunction served the public interest by making clear that the a commitment to RAND licensing terms may be relied on by parties using an applicable standard. In contrast, the defendants had sought for the district court to stay this action pending the ITC's resolution of their infringement claims.

The district court's decision is notable because it is among a number of recent decisions in which courts have taken challenging parties' ability to obtain injunctive relief on the basis of standard-essential patents. It also comes in the context of guidance from the DOJ and FTC that an exclusion order may be incompatible with the terms of the patent owner's RAND or fair, reasonable and nondiscriminatory (FRAND) licensing commitments to a standard-essential organization. This guidance was referenced repeatedly by the district court in this opinion.

The ITC has become a favored venue for patent owners seeking injunctive relief, because of the difficulty of obtaining such relief in federal courts after the Supreme Court's decision in eBay Inc. v. MercExchange, LLC. To the extent that this decision is upheld and federal courts bar any relief obtained before the ITC until after the full resolution of RAND dispute, the ITC may no longer be viewed as favorable forum for infringement claims relating to standard-essential patents.