                                                                             FILED
                               FOR PUBLICATION                                SEP 28 2012

                                                                          MOLLY C. DWYER, CLERK
                     UNITED STATES COURT OF APPEALS                        U .S. C O U R T OF APPE ALS




                            FOR THE NINTH CIRCUIT



MICROSOFT CORPORATION, a                          No. 12-35352
Washington corporation,
                                                  D.C. No. 2:10-cv-01823-JLR
              Plaintiff - Appellee,

  v.                                              OPINION

MOTOROLA, INC.; MOTOROLA
MOBILITY, INC.; GENERAL
INSTRUMENT CORPORATION,

              Defendants - Appellants.



                    Appeal from the United States District Court
                       for the Western District of Washington
                     James L. Robart, District Judge, Presiding

                     Argued and Submitted September 11, 2012
                             San Francisco, California

Before: WALLACE, THOMAS, and BERZON, Circuit Judges.

                     Opinion by Judge BERZON, Circuit Judge:

       In this interlocutory appeal, Motorola appeals from the district court’s

preliminary injunction to enjoin Motorola temporarily from enforcing a patent

injunction that it obtained against Microsoft in Germany. We review the district
court’s grant of a foreign anti-suit injunction under the deferential abuse-of-

discretion standard, and affirm.

                                   I. BACKGROUND

      The parties are involved in ongoing contract and patent litigation before the

district court. We recite here only the factual and procedural history most relevant

to this interlocutory appeal.

      A.     Standard-setting organizations and intellectual property law

      The underlying case before the district court concerns how to interpret and

enforce patent-holders’ commitments to industry standard-setting organizations

(“SSOs”), which establish technical specifications to ensure that products from

different manufacturers are compatible with each other. See generally Mark A.

Lemley, Intellectual Property Rights and Standard-Setting Organizations, 90

Calif. L. Rev. 1889 (2002). Specifically, the case involves the H.264 video coding

standard set by International Telecommunications Union (“ITU”), and the 802.11

wireless local area network standard set by the Institute of Electrical and

Electronics Engineers (“IEEE”). This appeal implicates primarily the H.264

standard.

      Standards provide many benefits for technology consumers, including not

just interoperability but also lower product costs and increased price competition.


                                           2
See Apple, Inc. v. Motorola Mobility, Inc., 2011 WL 7324582, at *1 (W.D. Wis.

June 7, 2011). The catch with standards “is that it may be necessary to use patented

technology in order to practice them.” Id. As a result, standards threaten to endow

holders of standard-essential patents with disproportionate market power. In

theory, once a standard has gained such widespread acceptance that compliance is

effectively required to compete in a particular market, anyone holding a standard-

essential patent could extract unreasonably high royalties from suppliers of

standard-compliant products and services. This problem is a form of “patent

holdup.” See generally Mark A. Lemley, Ten Things to Do About Patent Holdup of

Standards (And One Not To), 48 B.C. L. Rev. 149 (2007).

      Many SSOs try to mitigate the threat of patent holdup by requiring members

who hold IP rights in standard-essential patents to agree to license those patents to

all comers on terms that are “reasonable and nondiscriminatory,” or “RAND.” See

Lemley, Intellectual Property Rights, 90 Calif. L. Rev. at 1902, 1906. For example,

consider the ITU, whose H.264 standard is implicated in this appeal. The ITU’s

Common Patent Policy (the “ITU Policy”) provides that “a patent embodied fully

or partly in a [standard] must be accessible to everybody without undue

constraints.” Anyone who owns a patent declared essential to an ITU standard

must submit a declaration to the ITU stating whether it is willing to “negotiate


                                           3
licenses with other parties on a non-discriminatory basis on reasonable terms and

conditions.” If a “patent holder is not willing to comply” with the requirement to

negotiate licenses with all seekers, then the standard “shall not include provisions

depending on the patent.”

      Pursuant to these procedural requirements, Motorola has submitted

numerous declarations to the ITU stating that it will grant licenses on RAND terms

for its H.264-essential patents. A typical such declaration provides:

             The Patent Holder will grant a license to an unrestricted number of
             applicants on a worldwide, non-discriminatory basis and on
             reasonable terms and conditions to use the patented material necessary
             in order to manufacture, use, and/or sell implementations of the above
             ITU-T Recommendation | ISOC/IEC International Standard.1

      The ITU Policy does not specify how to determine RAND terms, or how

courts should adjudicate disputes between patent-holders and would-be licensors

under a RAND commitment. To the contrary, the ITU Policy includes the

following disclaimer:

             [Standards] are drawn up by technical and not patent experts; thus,
             they may not necessarily be very familiar with the complex
             international legal situation of intellectual property rights such as
             patents, etc. . . .


      1
        The ITU’s policy documents use the term “recommendation” rather than
“standard.” “ISOC/IEC” refers to the International Organisation for
Standardization and the International Electrotechnical Commission, with which the
ITU jointly developed the H.264 standard.

                                          4
             ....
                    . . . The detailed arrangements arising from patents (licensing,
             royalties, etc.) are left to the parties concerned, as these arrangements
             might differ from case to case.

The ITU Policy also disclaims any role for the organization in negotiating licenses

or in “settling disputes on Patents,” stating, “this should be left — as in the past —

to the parties concerned.” Finally, the ITU form that patent-holders use to submit

licensing declarations includes the caveat: “This declaration does not represent an

actual grant of a license.”

      Courts and commentators are divided as to how, if at all, RAND licensing

disputes should be settled. Relatedly, some commentators have suggested that

because of the RAND licensing commitment, injunctive relief is an inappropriate

remedy for infringement of standard-essential patents. See, e.g., Lemley, Ten

Things, 48 B.C. L. Rev. at 167 (“Denying [injunctive] relief is the most powerful

way to prevent patent holdup[.]”). Judge Posner, sitting by designation on the U.S.

District Court for the Northern District of Illinois, recently held in a different case

involving Motorola-owned standard-essential patents for which Motorola had

made a RAND commitment that the court would not

             be justified in enjoining Apple [the plaintiff in that case] from
             infringing [the patent at issue] unless Apple refuses to pay a royalty




                                            5
             that meets the FRAND requirement.2 By committing to license its
             patents on FRAND terms, Motorola committed to license the [patent]
             to anyone willing to pay a FRAND royalty and thus implicitly
             acknowledged that a royalty is adequate compensation for a license to
             use that patent.

Apple, Inc. v. Motorola, Inc., — F. Supp. 2d —, 2012 WL 2376664 (N.D. Ill. June

22, 2012), at *12 (Posner, J.). More generally, Justice Kennedy has suggested that

injunctions against patent infringement “may not serve the public interest” in cases

where “the patented invention is but a small component of the product the

companies seek to produce and the threat of an injunction is employed simply for

undue leverage in negotiations.” eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388,

396-97 (2006) (Kennedy, J., concurring).

      B.     The U.S. contract litigation

      In October 2010, Motorola sent Microsoft two letters offering to license

certain of its standard-essential patents. Of relevance to this appeal is the H.264

letter, sent on October 29, 2010. The letter proposed a royalty of “2.25% per unit”

for each standard-compliant product, “subject to a grant back license” of

Microsoft’s standard-essential patents, “based on the price of the end product (e.g.,

each Xbox 360 product, each PC/laptop, each smartphone, etc.) and not on


      2
        Instead of RAND, some courts and commentators use the alternative,
legally equivalent abbreviation “FRAND,” for “fair, reasonable, and non-
discriminatory rates.”

                                           6
component software (e.g., Xbox 360 system software, Windows 7 software,

Windows Phone 7 software, etc.).” It noted in closing: “Motorola will leave this

offer open for 20 days. Please confirm whether Microsoft accepts the offer.”

      Appended to the letter was a “non-exhaustive list” of the U.S. and

international patents that Motorola declares that it owns and that are essential to the

H.264 standard, and that would be “included in the license” being offered. The list

comprised not just U.S. patents but also numerous patents granted or filed in

foreign jurisdictions, including Australia, Canada, China, the European Patent

Convention,3 France, Germany, Great Britain, Ireland, Japan, Korea, Mexico, the

Netherlands, Norway, South Korea, Sweden, and Taiwan. Among these were

German patents numbered EP0538667 (“’667”) and EP0615384 (“’384”), and U.S.

patents 7,310,374 (“’374”); 7,310,375 (“’375”); and 7,310,376 (“’376”).4




      3
        The European Patent Convention allows applicants to file patent
applications with the European Patent Office (“EPO”), designating for which
contracting states the patent is sought. If the EPO grants a European patent, the
grant does not result in a single, transnational patent, but rather creates an
independent, nationally-enforceable patent within each of the designated states,
with “the effect of and . . . subject to the same conditions as a national patent
granted by that State, unless this Convention provides otherwise.” European Patent
Convention art. 2, Oct. 5, 1973. Infringement claims, for instance, must be litigated
independently within each country under each country’s patent law. See id. art.
64(3).
      4
          The prefix “EP” denotes that these are European patents.

                                           7
      On November 9, 2010, Microsoft filed a breach-of-contract suit against

Motorola in the U.S. District Court for the Western District of Washington, under

Washington state contract law.5 Microsoft’s theory of liability is that Motorola’s

proposed royalty terms were unreasonable, and that Motorola’s letters therefore

breached its contractual RAND obligations to the IEEE and the ITU, to which

Microsoft is a third-party beneficiary. The next day, Motorola filed a patent suit

against Microsoft in the U.S. District Court for the Western District of Wisconsin,

alleging infringement of U.S. patents ’374, ’375, and ’376. The Western District of

Wisconsin transferred the patent case to the Western District of Washington,

where, in June 2011, the district court ruled that Motorola’s patent claims were not

compulsory counterclaims to Microsoft’s contract claims. Nevertheless, the court

consolidated the two cases in the interest of judicial economy.

      In February 2012, the district court granted partial summary judgment for

Microsoft on its contract claims, finding that:

             (1) Motorola entered into binding contractual commitments with the
             IEEE and the ITU, committing to license its declared-essential patents
             on RAND terms and conditions; and (2) that Microsoft is a third-party
             beneficiary of Motorola’s commitments to the IEEE and the ITU.




      5
        Microsoft’s amended complaint of February 23, 2011, is the currently
operative complaint.

                                           8
The district court noted that, at a status conference earlier in February 2012,

“Motorola stated on the record that it did not dispute that it entered into the

aforementioned binding contractual commitments with the IEEE and the ITU and

that Microsoft is a third-party beneficiary of these commitments.”6

      The district court denied Microsoft’s motion for summary judgment as to

whether Motorola must offer RAND terms in its initial offer letters (or whether

only the ultimate license must be RAND, which is Motorola’s position), and as to



      6
          The transcript of the status conference states, in relevant part:
                       THE COURT: Is the first part of that sentence also accurate,
               that you entered into binding contractual commitments with IEEE and
               ITU, committing those to that RAND process?
                       [COUNSEL]: Well, yeah, that is really what the issue is, your
               Honor, in terms of what the assurance is. The assurance is that we
               would — that Motorola agreed to license those standard essential
               patents on RAND terms.
                       THE COURT: All I am asking is — I think you just agreed
               with me. I am not asking you if you did it or not, I am just asking you
               if that’s what you are supposed to do. I think the answer to that is yes.
                       [COUNSEL]: Yes. Enter into a license on RAND terms, that’s
               right.
                       THE COURT: The second point that Microsoft asked the court
               to declare is, and I will quote, “Microsoft is a third-party beneficiary
               of Motorola’s commitments to the SSOs.” Once again, let’s stay away
               from the precise terms that were offered and asked as a conceptual
               matter. I think there is also no disagreement on that. [Counsel], am I
               correct on that?
                       [COUNSEL]: Your Honor, that is correct, we would agree that
               Microsoft can fairly claim to be the third-party beneficiary of the
               assurance.

                                            9
whether Motorola’s letters offering to license its H.264 and 802.11 standard-

essential patents breached Motorola’s RAND obligations. These remaining two

issues are scheduled to be tried to the bench in November 2012.

      C.     The German patent litigation

      In July 2011, several months into the above-described domestic litigation,

Motorola sued Microsoft in the Landgericht Mannheim, or Mannheim Regional

Court, alleging infringement of the German ’667 and ’384 patents.7 In the German

suit, Motorola sought, among other relief, an injunction prohibiting Microsoft from

selling allegedly infringing products in Germany, including the Microsoft Xbox

gaming system and certain Microsoft Windows software.

      On May 2, 2012, the Mannheim Court issued its ruling. First, the court held

that Microsoft did not have a license to use Motorola’s patents. Second, it rejected

the argument that Motorola’s RAND commitment to the ITU created a contract

enforceable by Microsoft, because German law does not recognize third-party

contractual rights. Finally, the German court held that Microsoft had infringed the

’667 and ’384 patents, and enjoined Microsoft from “offering, marketing, using or



      7
       The plaintiff in the German suit is General Instrument Corporation, a
defendant in this case and a subsidiary of the Motorola Group. The defendants in
the German suit are Microsoft Corporation, the plaintiff in this case, as well as
Microsoft Deutschland GmbH and Microsoft Ireland Operations Ltd.

                                         10
importing or possessing . . . in the territory of the Federal Republic of Germany

decoder apparatus (in particular Xbox 360)”; from “offering and/or supplying in

the territory of the Federal Republic of Germany computer software (in particular

Windows 7 and/or Internet Explorer 9)”; and “from offering and/or supplying in

the territory of the Federal Republic of Germany computer software (in particular

Windows Media Player 12).” The German court rejected the argument that a

RAND commitment operates as a “waiver of claims for injunctive relief.”8

      The German injunction is not self-enforcing. According to an expert

declaration on German law submitted by Motorola to the district court, to enforce

the German patent injunction, Motorola would have to post a security bond

covering potential damages to Microsoft should the infringement ruling be

reversed on appeal. Microsoft could then file a motion with the German appellate

court to stay the injunction, which motion “would be granted if there is a

reasonable likelihood of success for the appeal and if enforcement pending appeal

would cause significant harm.”




      8
         We quote from the preliminary translations of the German court order
provided by the parties to the district court. Although each party submitted its own
translation, they do not differ substantially. This quote comes from the translation
provided by Microsoft.

                                         11
      According to the same expert, Microsoft could alternatively avoid

enforcement of the injunction pending appeal by following what is known in

German law as “the Orange Book procedure,” after the German Supreme Court

opinion that introduced it. Under this procedure, Microsoft would have to make

“an unconditional offer to conclude a license agreement” with Motorola. Microsoft

could include in its offer either a specific proposed royalty rate, or “a provision

according to which the patent holder shall determine the appropriate royalty rate at

its fair discretion,” subject to German judicial review.

      D.     The anti-suit injunction

      While the parties were awaiting the German court’s decision, Microsoft

asked Motorola (through an email exchange between their lawyers) to “agree that it

would not seek enforcement of a German injunction pending a ruling on the

RAND related issues by Judge Robart,” and “offered to post a bond of $300

million” against any possible injury to Motorola. Absent such an agreement,

Microsoft said, it would ask the district court to enjoin Motorola from enforcing

any German injunction that it might obtain. Motorola responded with “surprise[]

that Microsoft would ask a United States District Court to rule on the propriety of a

remedy in Germany,” particularly given the availability of the Orange Book

procedure.


                                           12
       On March 28, 2012, Microsoft moved the district court for a temporary

restraining order (“TRO”) and preliminary injunction to enjoin Motorola from

enforcing any German injunctive relief it might obtain. On April 12, 2012, after

oral argument on the motion, the district court granted Microsoft’s motion for a

TRO, requiring Microsoft to post a $100 million security bond as collateral for any

damages to Motorola. It was after that, on May 2, that the Mannheim Court issued

its ruling.

       On May 14, 2012, the district court converted the TRO into the preliminary

injunction at issue in this interlocutory appeal. The preliminary injunction bars

Motorola from “enforcing any injunctive relief it may receive in the German

Action with respect to the European Patents at issue therein,” and “shall remain in

effect until [the district court] is able to determine whether injunctive relief is an

appropriate remedy for Motorola to seek with respect to Microsoft’s alleged

infringement of Motorola’s standard essential patents.”

       The district court explained its rationale for granting the injunction as

follows. First, the district court concluded that the pending contract action before it

would be dispositive of the German patent action, “because the European Patents

at issue in the German Action were included in Motorola’s October 29 Letter

offering a worldwide license for Motorola’s H.264 Standard-essential patents, and


                                            13
because Motorola contracted with the ITU to license the European Patents on

RAND terms to all applicants on a worldwide basis.” Second, the court determined

that the German action raised “concerns against inconsistent judgments,” and that

“the timing of the filing of the German Action raises concerns of forum shopping

and duplicative and vexatious litigation,” particularly since “Motorola’s

commitments to the ITU involved approximately 100 Motorola-owned patents, yet

Motorola invoked the German Action implicating only two . . . of these patents and

sought injunctive relief in Germany before [the district court] could adjudicate that

precise issue.” “In sum,” the district court concluded, “Motorola’s actions have

frustrated [the district court’s] ability to adjudicate issues properly before it,” i.e.,

the propriety of injunctive relief in the RAND context.

       Finally, the district court reasoned that the injunction’s “impact on comity

would be tolerable,” Applied Med. Distrib. Corp. v. Surgical Co., 587 F.3d 909,

919 (9th Cir. 2009) (internal quotation marks and citation omitted), because the

German action was filed after the U.S. action; the “anti-suit injunction is limited in

scope to enjoining Motorola from enforcing any injunctive relief that it may

receive in the German Action,” but does not otherwise affect Motorola’s ability to

pursue its German patent claims against Microsoft; and “[the district court] has [a]

strong interest in adjudicating the claims before it,” as both parties are U.S.


                                             14
corporations and the facts at issue in the contract dispute took place within the

United States.

      On May 16, 2012, Motorola filed a timely notice of appeal from the

preliminary injunction in this court.

                                 II. JURISDICTION

      “Not all cases involving a patent-law claim fall within the Federal Circuit’s

jurisdiction.” Holmes Group, Inc. v. Vornado Air Circulation Sys., Inc., 535 U.S.

826, 834 (2002). The Federal Circuit has jurisdiction over an interlocutory appeal

only if it would have jurisdiction over a final appeal in the case under 28 U.S.C. §

1295. 28 U.S.C. § 1292(c)(1). Microsoft’s complaint sounds in contract and

invokes the district court’s diversity jurisdiction under 28 U.S.C. § 1332. We

therefore have jurisdiction over this interlocutory appeal under 28 U.S.C. §

1292(a)(1).

                          III. STANDARD OF REVIEW

      We review a district court’s foreign anti-suit injunction for abuse of

discretion. See Applied Med., 587 F.3d at 913. We review the district court’s

factual findings in connection with the injunction for clear error, and its legal

interpretations de novo. See id. “When a district court makes an error of law, it is

an abuse of discretion.” Id.


                                           15
      Abuse-of-discretion review is highly deferential to the district court. See

United States v. Hinkson, 585 F.3d 1247, 1261-62 (9th Cir. 2009) (en banc). Under

this standard of review, we must “uphold a district court determination that falls

within a broad range of permissible conclusions in the absence of an erroneous

application of law.” Grant v. City of Long Beach, 315 F.3d 1081, 1091 (9th Cir.

2002), amended by 334 F.3d 795 (9th Cir. 2003) (order). We reverse “only when”

we are “convinced firmly that the reviewed decision lies beyond the pale of

reasonable justification under the circumstances.” Harman v. Apfel, 211 F.3d 1172,

1175 (9th Cir. 2000).

                                  IV. ANALYSIS

      “‘A federal district court with jurisdiction over the parties has the power to

enjoin them from proceeding with an action in the courts of a foreign country,

although the power should be used sparingly.’” E. & J. Gallo Winery v. Andina

Licores S.A., 446 F.3d 984, 989 (9th Cir. 2006) (quoting Seattle Totems Hockey

Club, Inc. v. Nat’l Hockey League, 652 F.2d 852, 855 (9th Cir. 1981)).

      We clarified our framework for evaluating a foreign anti-suit injunction in

Gallo, 446 F.3d 984, and elaborated upon that framework in Applied Medical, 587

F.3d 909. Together, these cases establish a three-part inquiry for assessing the

propriety of such an injunction. First, we determine “whether or not the parties and


                                          16
the issues are the same” in both the domestic and foreign actions, “and whether or

not the first action is dispositive of the action to be enjoined.” Gallo, 446 F.3d at

991 (citations omitted). Second, we determine whether at least one of the so-called

“Unterweser factors” applies. See id. Finally, we assess whether the injunction’s

“impact on comity is tolerable.” Id.

       The Unterweser factors are a disjunctive list of considerations that may

justify a foreign anti-suit injunction, first articulated by the Fifth Circuit in In re

Unterweser Reederei GMBH, 428 F.2d 888, 896 (5th Cir. 1970), aff’d on reh’g,

446 F.2d 907 (5th Cir. 1971) (en banc) (per curiam), rev’d on other grounds sub

nom. M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972), and adopted by this

court as instructive in Seattle Totems, 652 F.2d at 855. The full list of Unterweser

factors is as follows:

              [whether the] foreign litigation . . . would (1) frustrate a policy of the
              forum issuing the injunction; (2) be vexatious or oppressive; (3)
              threaten the issuing court’s in rem or quasi in rem jurisdiction; or (4)
              where the proceedings prejudice other equitable considerations.

Gallo, 446 F.3d at 990 (quoting Seattle Totems, 652 F.2d at 855).9


       9
        In Applied Medical, we more narrowly described the second Gallo step as
an inquiry into “whether the foreign litigation would ‘frustrate a policy of the
forum issuing the injunction,’” 587 F.3d at 913 (quoting Gallo, 446 F.3d at 991);
in other words, we referenced solely the first of the Unterweser factors. But there is
no indication that Applied Medical meant, in so doing, to narrow the Gallo inquiry.
                                                                         (continued...)

                                            17
      In determining whether to issue Microsoft’s requested anti-suit injunction,

the district court applied the three-step Gallo framework, and therefore “identified

the correct legal standard for decision of the issue before it.” Hinkson, 585 F.3d at

1251. Under the abuse-of-discretion standard of review, we next consider whether,

in applying that framework, “the district court’s findings of fact, and its application

of those findings of fact to the correct legal standard, were illogical, implausible, or

without support in inferences that may be drawn from facts in the record.” Id.

      A.     The parties and issues are the same in both actions

      The threshold consideration for a foreign anti-suit injunction is “whether or

not the parties and the issues are the same” in both the domestic and foreign

actions, “and whether or not the first action is dispositive of the action to be

enjoined.” Gallo, 446 F.3d at 991 (citations omitted); accord Quaak v. Klynveld

Peat Marwick Goerdeler Bedrijfsrevisoren, 361 F.3d 11, 18 (1st Cir. 2004) (“The

gatekeeping inquiry is, of course, whether parallel suits involve the same parties



      9
        (...continued)
Rather, in both Gallo and Applied Medical, such a focus made sense because the
contracts at issue included forum-selection clauses, and the specific rationale for
the anti-suit injunction in each case was to protect the strong U.S. public policy of
enforcing forum-selection clauses. Still, Gallo itself is clear that the list of
Unterweser factors is disjunctive, and that “any of the Unterweser factors” may
justify a foreign anti-suit injunction, not just the first. 446 F.3d at 991 (emphasis
added).

                                           18
and issues.”); Paramedics Electromedicina Comercial, Ltda. v. GE Med. Sys. Info.

Tech., Inc., 369 F.3d 645, 652 (2d Cir. 2004).

       Conducting this threshold inquiry in Applied Medical with reference to a

contract containing a forum-selection clause, we clarified that

              whether the issues are the same and the first action dispositive of the
              action to be enjoined are interrelated requirements; that is, to the
              extent the domestic action is capable of disposing of all the issues in
              the foreign action and all the issues in the foreign action fall under the
              forum selection clause, the issues are meaningfully “the same.”

587 F.3d at 915. Although the contract at issue in this case does not contain a

forum-selection clause, we are nevertheless informed by Applied Medical’s

emphasis on the functional character of the threshold similarity-of-issues inquiry.

We ask “whether the issues are the same” not in a technical or formal sense, but “in

the sense that all the issues in the foreign action . . . can be resolved in the local

action.” Id. The issues need not be “precisely and verbally identical,” as “the verbal

form of laws in different countries will inevitably differ.” Id.

       Here, all agree that the parties are the same in both the U.S. and German

actions. As to whether the issues are the same in the sense that all the issues in the

German patent action can be resolved in the U.S. contract action, Motorola argues

that the U.S. action cannot resolve the German action, because patent law is

uniquely territorial and patents have no extraterritorial effect.


                                            19
      To be sure, if the district court had based its injunction in an expectation that

U.S. patent claims could dispose of German patent claims, then it would have

erred. See Stein Assocs., Inc. v. Heat & Control, Inc., 748 F.2d 653, 658 (Fed. Cir.

1984) (upholding denial of foreign anti-suit injunction against enforcement of

British patents corresponding to U.S. patents-in-suit, holding that “resolution of the

domestic action will not dispose of the British action” because “[o]nly a British

court, applying British law, can determine validity and infringement of British

patents”); Canadian Filters (Harwich) Ltd. v. Lear-Siegler, Inc., 412 F.2d 577, 579

(1st Cir. 1969) (vacating injunction of Canadian patent proceedings and finding

that none of the exceptions to comity that might justify a foreign anti-suit

injunction applied “where the subject matter of the foreign suit is a separate,

independent foreign patent right”); cf. Sperry Rand Corp. v. Sunbeam Corp., 285

F.2d 542, 544-45 (7th Cir. 1961) (rejecting argument that district court could

enjoin German trademark litigation).

      But the district court did not base its injunction on the pendency of parallel

patent proceedings. Rather, it is Microsoft’s Washington state contract claims that

the district court determined could resolve the German patent claims. Specifically,

the district court concluded that the pending domestic contract action could resolve

the issues in the German patent action “because the European Patents at issue in


                                          20
the German Action were included in Motorola’s October 29 Letter offering a

worldwide license for Motorola’s H.264 Standard-essential patents, and because

Motorola contracted with the ITU to license the European Patents on RAND terms

to all applicants on a worldwide basis.”

      The contractual umbrella over the patent claims in this case brings it in line

with Medtronic, Inc. v. Catalyst Research Corp., 518 F. Supp. 946 (D. Minn.

1981), aff’d, 664 F.2d 660 (8th Cir. 1981). There, as here, the district court

enjoined a party from enforcing injunctive relief in foreign patent-infringement

actions, although unlike here, none of the foreign fora had yet issued an injunction.

The district court in Medtronic correctly observed that “[w]here patents are the

issue, the subject matter is not the same” for foreign anti-suit injunction purposes.

Id. at 955 (citing Western Elec. Co., Inc. v. Milgo Elec. Corp., 450 F. Supp. 835,

838 (S.D. Fla. 1978)). But the court concluded that it could issue an anti-suit

injunction against the enforcement of foreign patents where the precise issue

before the U.S. court was not the patents themselves, but “a contract between the

parties” not to enforce the patents. Id. In other words, the party was “not seeking to

enjoin [a party from litigating in] a foreign court on the basis of a patent validity or

infringement finding by a United States court” but on the basis of a contract

interpretation by a U.S. court. Id.


                                           21
      Ordinarily, we do not assess at all the likelihood of success on the merits in a

case like this, because when a preliminary injunction is also a foreign anti-suit

injunction, the likelihood-of-success aspect of the traditional preliminary

injunction test is replaced by the Gallo test. See Gallo, 446 F.3d at 990 (“To the

extent the traditional preliminary injunction test is appropriate, we only need

address whether [the injunction seeker] showed a significant likelihood of success

on the merits. The merits in this case, however, are about whether [the injunction

seeker] has demonstrated that the factors specific to an anti-suit injunction weigh in

favor of granting that injunction here.” (alterations in original) (internal quotation

marks, ellipses, and citation omitted)). So in this case, a ballpark, tentative

assessment of the merits of the contract dispute is intrinsically bound up with the

threshold anti-suit injunction inquiry: If we concluded that the district court’s

interpretation of the RAND commitment as a contract enforceable by Microsoft

was fundamentally legally erroneous, then we would have to conclude that it was

an abuse of discretion for the district court to rule that the U.S. contract action

might dispose of the German patent action. Here, however, Motorola does not

dispute that its RAND commitments created a contract that Microsoft can enforce

as a third-party beneficiary, even if it disagrees with Microsoft over how to

interpret the terms of that contract.


                                           22
      We emphasize that we do not (indeed, we may not) decide whether the

district court’s partial summary judgment, or its determination that it would

adjudicate a RAND rate, was proper — if an appellate court is to review those

determinations, it will have to do so on a final, not an interlocutory, appeal. But we

do hold this much: The district court’s conclusions that Motorola’s RAND

declarations to the ITU created a contract enforceable by Microsoft as a third-party

beneficiary (which Motorola concedes), and that this contract governs in some way

what actions Motorola may take to enforce its ITU standard-essential patents

(including the patents at issue in the German suit), were not legally erroneous.

Motorola, in its declarations to the ITU, promised to “grant a license to an

unrestricted number of applicants on a worldwide, non-discriminatory basis and on

reasonable terms and conditions to use the patented material necessary” to practice

the ITU standards. This language admits of no limitations as to who or how many

applicants could receive a license (“unrestricted number of applicants”) or as to

which country’s patents would be included (“worldwide,” “the patented material

necessary”). Implicit in such a sweeping promise is, at least arguably, a guarantee

that the patent-holder will not take steps to keep would-be users from using the

patented material, such as seeking an injunction, but will instead proffer licenses

consistent with the commitment made. See Apple, 2012 WL 2376664 at *12.


                                          23
      In particular, the face of the contract makes clear that it encompasses not just

U.S. patents, but all of Motorola’s standard-essential patents worldwide. When that

contract is enforced by a U.S. court, the U.S. court is not enforcing German patent

law but, rather, the private law of the contract between the parties. Although

patents themselves are not extraterritorial, there is no reason a party may not freely

agree to reservations or limitations on rights that it would have under foreign

patent law (or any other rights that it may have under foreign law) in a contract

enforceable in U.S. courts. By way of comparison, whenever a party agrees to a

forum-selection clause, it relinquishes any benefits that it might receive from

statutory rights or favorable canons of contractual interpretation only available in

other forums. That is the party’s choice, and “[t]here are compelling reasons why a

freely negotiated private international agreement, unaffected by fraud, undue

influence, or overweening bargaining power, . . . should be given full effect.” M/S

Bremen, 407 U.S. at 12-13.

      Here, there is no forum-selection clause, but the broader principle applies:

Courts should give effect to freely made contractual agreements. Motorola made

promises to the ITU to license its standard-essential patents worldwide to all

comers. In exchange, it received the benefit of having its patents implicated in the




                                          24
standards. Motorola could have withheld the promise at the price of having the ITU

avoid its patents when setting standards, but chose not to.

      In sum, whether or not the district court ultimately determines that Motorola

breached its contract with the ITU (it may or may not have), it is clear that there is

a contract, that it is enforceable by Microsoft, and that it encompasses not just U.S.

patents but also the patents at issue in the German suit. Moreover, even if Motorola

did not breach its contract, then, however the RAND rate is to be determined under

the ITU standards, injunctive relief against infringement is arguably a remedy

inconsistent with the licensing commitment. That the licensing agreement is not

itself a license according to the ITU Policy does not detract from this conclusion.

The question is how the commitment to license is to be enforced, not whether the

commitment itself is a license.

      Motorola maintains that it is improper for the district court to determine the

prospective RAND rate (or retrospective royalties consistent with the RAND rate),

at least before good-faith bargaining between the patentee and the prospective

licensee has failed to produce a rate. We do not at this juncture decide whether that

is true or not. Cf. Apple, 2012 WL 2376664 at *11 (Posner, J.) (suggesting that

district court could determine RAND royalty by “start[ing] with what the cost to

the licensee would have been of obtaining, just before the patented invention was


                                          25
declared essential to compliance with the industry standard, a license for the

function performed by the patent”); id. at *12 (“Motorola agreed to license its

standards-essential patents on FRAND terms as a quid pro quo for their being

declared essential to the standard. It does not claim to have conditioned agreement

on prospective licensees’ making counteroffers in license negotiations.” (citation

omitted)). Whatever the appropriate method of determining the RAND licensing

rate, it could well be that retrospective payment at the rate ultimately determined

and a determination of the future rate, not an injunction banning sales while that

rate is determined, is the only remedy consistent with the contractual commitment

to license users of ITU standard-essential patents.

      We conclude that the district court did not abuse its discretion in

determining that Microsoft’s contract-based claims, including its claim that the

RAND commitment precludes injunctive relief, would, if decided in favor of

Microsoft, determine the propriety of the enforcement by Motorola of the

injunctive relief obtained in Germany.

      B.     At least two Unterweser factors apply

      At the second Gallo step, we look to “whether the foreign litigation would

‘frustrate a policy of the forum issuing the injunction,’” Applied Med., 587 F.3d at




                                          26
913 (quoting Gallo, 446 F.3d at 991), or whether any of the other Unterweser

factors apply. See Gallo, 446 F.3d at 991.

      In explaining its rationale for the injunction, the district court made findings

sufficient to establish at least two of the Unterweser factors: that the foreign

litigation is “‘vexatious or oppressive,’” and that the foreign litigation

“‘prejudice[s] . . . equitable considerations.’” Gallo, 446 F.3d at 990 (quoting

Seattle Totems, 652 F.2d at 855); cf. id. at 989 (“Courts derive the ability to enter

an anti-suit injunction from their equitable powers.”). Based on its interactions

with the parties, the district court found that “the timing of the filing of the German

Action raises concerns of forum shopping and duplicative and vexatious

litigation,” particularly since “Motorola’s commitments to the ITU involved

approximately 100 Motorola-owned patents, yet Motorola invoked the German

Action implicating only two . . . of these patents and sought injunctive relief in

Germany before this court could adjudicate that precise issue,” i.e., the propriety of

injunctive relief for infringement of standard-essential patents. In other words, in

the district court’s view, Motorola’s German litigation was “vexatious or

oppressive” to Microsoft and interfered with “equitable considerations” by

compromising the court’s ability to reach a just result in the case before it free of




                                           27
external pressure on Microsoft to enter into a “holdup” settlement before the

litigation is complete.

      Motorola contends that the German litigation cannot be described as

“vexatious” because the German court ruled in Motorola’s favor. But litigation

may have some merit and still be “vexatious,” which is defined as “without

reasonable or probable cause or excuse; harassing; annoying.” Black’s Law

Dictionary 1701 (9th ed. 2009). In the midst of litigation over Motorola’s

obligations under Washington state contract law with respect to a portfolio of

patents that includes the two German patents, Motorola initiated separate

proceedings in Germany to enforce those two patents directly. The district court

interpreted this step as a procedural maneuver designed to harass Microsoft with

the threat of an injunction removing its products from a significant European

market and so to interfere with the court’s ability to decide the contractual

questions already properly before it. Although the district court’s interpretation of

Motorola’s litigation decisions may not be the only possible interpretation, it is not

“illogical, implausible, or without support from inferences that may be drawn from

facts in the record.” Hinkson, 585 F.3d at 1251. We therefore cannot hold that the

district court abused its discretion at this stage of the Gallo analysis.

      C.     The injunction’s impact on comity is tolerable


                                            28
      Finally, we assess whether the injunction’s “impact on comity is tolerable.”

Gallo, 446 F.3d at 991.

      The particular phrasing is instructive. Gallo requires not that we calculate

the precise quantum of the injunction’s interference with comity, but only that we

estimate whether any such interference is so great as to be intolerable. Such a

flexible, fact- and context-specific inquiry accords both with the posture of

deference to the district court that abuse-of-discretion review requires generally,

and with the resistance of comity in particular to precise measurement. After all,

comity, as many courts have recognized, is “a complex and elusive concept.” Laker

Airways Ltd. v. Sabena, Belgian World Airlines, 731 F.2d 909, 937 (D.C. Cir.

1984) (quoted in Gallo, 446 F.3d at 995); see also Quaak, 361 F.3d at 18

(“[C]omity is an elusive concept.”). It “is neither a matter of absolute obligation,

on the one hand, nor of mere courtesy and good will, upon the other.” Hilton v.

Guyot, 159 U.S. 113, 163-64 (1895).

      Nevertheless, our cases, along with instructive authority from other circuits,

do provide some objective guidance as to factors that may inform our comity

inquiry in the anti-suit injunction context. For instance, comity is less likely to be

threatened in the context of a private contractual dispute than in a dispute

implicating public international law or government litigants. See Gallo, 446 F.3d at


                                           29
994; Applied Med., 587 F.3d at 921. At one pole, where two parties have made a

prior contractual commitment to litigate disputes in a particular forum, upholding

that commitment by enjoining litigation in some other forum is unlikely to

implicate comity concerns at all. See Applied Med., 587 F.3d at 921. At the other

pole, if (hypothetically speaking) the State Department represented to the court that

“the issuance of an injunction really would throw a monkey wrench, however

small, into the foreign relations of the United States,” Allendale Mut. Ins. Co. v.

Bull Data Sys., Inc., 10 F.3d 425, 431 (7th Cir. 1993) (Posner, J.), then comity

would presumably weigh quite heavily against an anti-suit injunction. Between

these two poles, courts must in their discretion evaluate whether and to what extent

international comity would be impinged upon by an anti-suit injunction under the

particular circumstances. The order in which the domestic and foreign suits were

filed, although not dispositive, may be relevant to this determination depending on

the particular circumstances. Compare Applied Med., 587 F.3d at 921 (where

“subsequent filing” of foreign action “raises the concern that [party] is attempting

to evade the rightful authority of the district court,” enjoining foreign action would

not “intolerably impact comity”), with Gallo, 446 F.3d at 994 (when parties have

forum-selection clause, “one party’s filing first in a different forum would not

implicate comity at all”).


                                          30
      The scope of the anti-suit injunction is another factor relevant to the comity

inquiry. In Laker Airways, which we have recognized as a “seminal case[] on anti-

suit injunctions,” Gallo, 446 F.3d at 994, the D.C. Circuit explained: “Comity

teaches that the sweep of the injunction should be no broader than necessary to

avoid the harm on which the injunction is predicated.” Laker Airways, 731 F.2d at

933 n.81. A useful illustration of this teaching is provided by the Second Circuit’s

opinion in Ibeto Petrochemical Indus. Ltd. v. M/T Beffen, 475 F.3d 56 (2d Cir.

2007). In that case, the receiver of an allegedly contaminated oil shipment from

New Jersey to Nigeria sued the shipper in Nigerian court, subsequently demanded

arbitration in London, and then filed an additional suit against the shipper in U.S.

district court. Id. at 59. The U.S. district court found that the parties had an

enforceable contractual agreement to arbitrate any disputes in London, and

accordingly compelled arbitration, stayed the U.S. action pending completion of

the arbitration, and permanently enjoined the litigation in Nigeria. Id. at 60-61. The

Second Circuit concluded that an anti-suit injunction was appropriate but that the

district court’s generally worded, seemingly permanent injunction “cut[] much too

broadly.” Id. at 65. Noting that “principles of international comity and reciprocity

require a delicate touch in the issuance of anti-foreign suit injunctions,” the Second

Circuit remanded to the district court with instructions to modify the injunction


                                           31
into a more tailored order “directed specifically to the parties” and limited in time.

Id.

      Applying these precepts to our case, we cannot conclude that the district

court abused its discretion in determining that a foreign anti-suit injunction could

issue. At bottom, this case is a private dispute under Washington state contract law,

between two U.S. corporations; it does not raise any “public international issue.”

Gallo, 446 F.3d at 994. Motorola only initiated the German litigation after

Microsoft filed suit in the United States. Moreover, the anti-suit injunction sweeps

“no broader than necessary,” Laker Airways, 731 F.2d at 933 n.81; it bars Motorola

not from pursuing its German patent claims against Microsoft altogether, but only

from posting the bond required to enforce the German injunction. Even that bar

could expire as soon as the district court has had an opportunity to adjudicate the

contractual issues before it.

      Motorola argues that the anti-suit injunction offends comity intolerably

because its German patent claims have merit under German law, as evidenced by

the Mannheim Court’s ruling in Motorola’s favor and injunction against the sale of

Microsoft products, and because German courts, unlike some U.S. courts and

commentators, do not interpret the RAND commitment to create a contract

enforceable by third parties or to foreclose injunctive relief. If Motorola is right


                                           32
that the two German patents are essential to implementing the H.264 industry

standard, then it is hardly surprising that the German court found that Microsoft

was using those patents in its H.264-compliant products.

      German and U.S. courts may differ as to what legal conclusions follow from

that finding. But the mere fact that different jurisdictions answer the same legal

question differently does not, without more, generate an intolerable comity

problem. If that were the case, then there could virtually never be a foreign anti-

suit injunction: Parallel proceedings in different jurisdictions would have to be

permitted to proceed any time the two jurisdictions had different rules of law,

which is almost always the case.

      Again our forum-selection cases prove instructive on this point, even though

this case does not involve a forum-selection clause. In those cases, we have

emphasized that an anti-suit injunction in the service of “enforcing a contract”

between private parties does not “breach[] norms of comity,” even if, absent that

contract, one party might have enjoyed different procedural or substantive

advantages under another country’s law. Gallo, 446 F.3d at 994; see also, e.g.,

Paramedics, 369 F.3d at 649-55 (upholding foreign anti-suit injunction against

Brazilian litigation commenced after U.S. court had ruled the parties’ dispute was

subject to their arbitration agreement and compelled arbitration, even though the


                                          33
Brazilian suit alleged “a tort claim unique to Brazilian law” that the party argued

could not be arbitrated).

      In any event, we have never suggested that the propriety of an anti-suit

injunction turns upon the merits of the foreign suit under foreign law. In Applied

Medical, the object of a foreign anti-suit injunction made a similar argument that

its Belgian action could not be enjoined consistent with comity, because the action

was initiated “in good faith and [was] founded on legitimate Belgian law.” 587

F.3d at 921. We rejected this argument. To be sure, in Gallo, we suggested that an

anti-suit injunction may be especially warranted to restrain a party from

“potentially fraudulent” foreign litigation. 446 F.3d at 993. But “we made clear in

Gallo that demonstration of such extreme facts was not necessary to conclude that

an injunction would not have an intolerable impact on comity.” Applied Med., 587

F.3d at 921 (construing Gallo).

      Motorola further urges that the anti-suit injunction must be overturned

because it has disabled Motorola from enforcing its German patents in the only

forum in which they can be enforced. This argument exaggerates the scope of the

injunction, which leaves Motorola free to continue litigating its German patent

claims against Microsoft as to damages or other non-injunctive remedies to which

it may be entitled. Indeed, depending on the outcome of the district court litigation,


                                          34
Motorola may well ultimately be able to enforce the German injunction too. It was

Motorola that offered to license the German patents to Microsoft in its October 29,

2010, letter, confirming that those patents are implicated in its RAND contractual

agreement. If Motorola wishes to challenge the district court’s interpretation of that

agreement, it will have to do so on final appeal, after this case is fully resolved. In

the meantime, we cannot say that the district court’s limited anti-suit injunction to

protect its ability to reach that final resolution enacts any intolerable incursion into

Germany’s sovereignty.

      However elusive it may be, comity is not, of course, to be contemplated

lightly. Foreign anti-suit injunctions should not be issued routinely. But the record

makes clear that the district court gave thoughtful consideration to the importance

of international comity and nevertheless determined that under the unique

circumstances of this case, an anti-suit injunction was proper. Reviewing that

determination for an abuse of discretion, we cannot say that it rested upon an

erroneous view of the law or a clearly erroneous view of the facts. “At most, there

are competing comity concerns, so it cannot fairly be said” that the district court’s

preliminary injunction “would have an intolerable impact on comity.” Applied

Med., 587 F.3d at 921.

                                  V. CONCLUSION


                                           35
      Under the unique circumstances of this case, the district court’s narrowly

tailored preliminary injunction was not an abuse of discretion. We AFFIRM.




                                         36
                                    Counsel

Derek L. Shaffer, Quinn Emanuel Urquhart & Sullivan, LLP, Washington D.C.;
Kathleen M. Sullivan, Quinn Emanuel Urquhart & Sullivan, LLP, New York, NY,
attorneys for Appellants.

Arthur W. Harrigan, Jr., Christopher Wion, Shane P. Cramer, Danielson Harrigan
Leyh & Tollefson LLP, Seattle, WA; David T. Pritikin, Constantine L. Treta, Jr.,
Richard A. Cederoth, Robert N. Hochman, Nathaniel C. Love, Sidley Austin LLP,
Chicago, IL; Carter G. Phillips, Sidley Austin LLP, Washington, D.C.; T. Andrew
Culbert, David E. Killough, Microsoft Corporation, Redmond, WA, attorneys for
Appellee.




                                       37
