Judge confirms Google's right to jury trial on Microsoft's breach-of-FRAND-contract claims

The breach-of-contract and related damages issues in the Microsoft v. Motorola FRAND contract case in the Western District of Washington will be put before a jury when the second trial in this litigation takes place (starting August 26, 2013). Judge James L. Robart, the federal judge presiding over this case, just denied Microsoft's motion to confirm that the court would hold a bench trial. Judge Robart determined that Google's Motorola had not waived its right to a jury trial, but even if had found otherwise on this question, "it would not overcome the court's earlier determination that Motorola may reasonably rely on Microsoft's jury demand on the breach of contract issues in the Motorola Action [a patent infringement case over standard-essential patents] which was transferred to this district and consolidated into this action".

In November 2012 Judge Robart held a six-day bench trial, which resulted in last month's already-famous FRAND rate-setting decision, which found that Google was entitled to a tiny fraction (less than one twentieth of a percent) of Motorola's original (fall 2010) demand: Microsoft estimates annual payments on the order of $1.8 million, while the original demand, in a conservative estimate, would have amounted to $4 billion annually. Not only did Judge Robart set a specific rate at which Google is now going to have to extend to Microsoft a license to its declared-essential H.264 (video codec) and IEEE 802.11 (WiFi, or WLAN) patents but he also determined a range. At the August 2013 trial the first question is going to be whether Motorola breached its FRAND contract through its original royalty demands from Microsoft, an intended beneficiary. Motorola's counsel conceded last year that a "blatantly unreasonable" initial demand would constitute a breach of contract. In my opinion, $4 billion is so far outside of a range that is in the millions that I can't imagine any other finding than a breach, but Google will get its day in court and can try to defend Motorola's conduct.

If and when there is a finding of a breach of contract, damages will have to be awarded, and documents filed earlier this month revealed that the parties are already wrangling over them. Microsoft's damages theories include the cost of relocating its European distribution center in order to mitigate the impact of an H.264 SEP injunction Motorola was seeking (and indeed ended up winning, but never got to enforce) in Germany. I couldn't help but conclude from the related documents that Google is trying very hard to stall this FRAND contract case. By insisting on a jury trial (which is, however, a constitutional right), Google is trying to inject some imponderabilities into this case -- which could also backfire and result in a damages award greater than what the judge would have awarded, but we'll never know. It may also hope that a jury trial provides it with more ammunition for an appeal (criticizing instructions etc.) and opportunities for trying to win some delay between now and late August. The presentations to the jury will be duplicative of significant parts of what was presented to Judge Robart in November. But again, they're entitled to it no matter what the agenda is. Maximum efficiency is not the objective. This much is certain.

This FRAND enforcement case has gone very well for Microsoft as far as the major substantive decisions are concerned. Shortly after the rate-setting trial Microsoft won a summary judgment against Google's (Motorola's) pursuit of injunctive relief and previously prevented Motorola from enforcing the aforementioned German injunction (Google appealed this part, but the Ninth Circuit affirmed it). And the rate-setting decision was a clear win for Microsoft (there was unanimous consensus about that outcome in the media). But the issue adjudicated today -- the type of trial -- is the third noteworthy context in this case in which Judge Robart declines to manage the case according to Microsoft's preference for swift resolution and shortcuts. About a year ago he denied Microsoft's motion for partial summary judgment on the breach-of-contract question and, at the related hearing, criticized both parties for gamesmanship. And in the rate-setting decision he found that Microsoft was an intended third-party beneficiary of a grant-back provision in Google's H.264-related license agreement with patent pool firm MPEG LA, but merely used that fact as an indicator of a FRAND rate as opposed to finding that the agreement would determine the rate -- which I attribute to the fact that Microsoft (as it told the judge at a hearing) didn't want to add Google to that case as an additional defendant because such a move could cause major delay.

It's not just that Microsoft would like to have the FRAND licensing issues resolved at the earliest opportunity. Last year the court also stayed the parties' mutual infringement claims pending in that district (where all of the parties' U.S. federal claims have been transferred except for Motorola's federal companion lawsuit to its Xbox ITC complaint, which is currently stayed and will probably be transferred as well if and when it resumes) in order to focus on the FRAND issues first. Microsoft won a U.S. import ban about a year ago at the ITC and has already won three German injunctions against Motorola's Android-based devices (1, 2, 3), and is likely to win a fourth one, relating to Google Maps, in two weeks from today. But most of the patents it asserted against Motorola haven't come to judgment yet, due to the court's focus on FRAND. This, too, benefits Google. But it was a stipulation between the parties and I don't know how it came into being. I just doubt that Microsoft wanted to slow things down. Google's Motorola is one of a very few significant Android device makers to have refused so far to take a royalty-bearing patent license covering Google's mobile operating system.

Here's today's order denying a bench trial if you're interested in the reasons for which the judge sided with Google on this procedural question:

13-05-20 Order Denying Microsoft v. Motorola Bench Trial on Breach-Of-contract Issues

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Google's FRAND-zero patent license for VP8 threatens to divide Web and FOSS communities

Google is already promoting the VP9 video codec, which may very well raise new patent issues, while pushing for adoption of VP8 as an Internet standard. But the patent license it has drafted for VP8 and just published doesn't meet the requirements of the Open Source Initiative's definition of open source, says the President of the OSI's Board of Directors, Simon Phipps, in a blog post. According to Mr. Phipps, the draft license "shows signs of unfamiliarity with the tenets of software freedom". The OSI can't speak for the Free Software Foundation, of course, but the two organizations share many values and the FSF's emphasis of software freedom ("[t]he issue is not about price") entails even stricter requirements for acceptable license terms. Simply put, if your proposal doesn't please Simon Phipps, know that Richard Stallman ("RMS") is harder to please.

Historically, the World Wide Web Consortium (W3C) has applied its royalty-free (RF) licensing requirements in ways that ensured compatibility of HTML-related essential patent licenses with the philosophies of Free and Open Source Software (FOSS) organizations, particularly the FSF and the OSI. The Web movement and the FOSS movement have succeeded symbiotically and in tandem: FOSS powers large parts of the Web and drove its adoption, while the Web has allowed FOSS to thrive and contributed greatly to its popularity. If Google wants the W3C to consider its proposed VP8 patent license an acceptable W3C RF license, it effectively asks the W3C to part ways with the FSF and the OSI, after approximately two decades of close and fruitful collaboration. This is utterly divisive.

Shortly after the announcement of an MPEG LA-Google license deal relating to VP8 I was confused about Google's intentions to comply with the W3C patent policy when I saw a Google employee link to a web page that involved FRAND licensing commitments when he said they were planning to comply with the W3C's patent policy. Now that Google's proposal has been published, the answer is that Google's proposed VP8 patent license is not a permissive RF license but a typical FRAND-zero (or, synonymously, "RAND-zero") license. Zero license fees to be paid by licensees (though Google presumably paid or pays MPEG LA) -- but reasonable and non-discriminatory terms (field-of-use restrictions, reciprocity) are imposed and, which Mr. Phipps considers the most significant issue with the proposal, "gaining benefit from the agreement requires individual execution of the license agreement".

The final two sentences of the OSI President's blog post declares Google the loser and VP8's rivals the winning camp:

"This document seems to me to be an effective outcome for those in MPEG-LA's patent-holder community who want to see VP8 disrupted. It has provoked an autoimmune response that must have Google's enemies smiling wickedly."

I don't want to speculate about the intentions of the 11 originally-unnamed, meanwhile-disclosed companies that contributed patents to the MPEG LA-Google deal, or of the MPEG LA pool firm. Frankly, it doesn't matter what company A or company B wants to achieve in this context. At least for now, Google's own license grant under Section 3 of that proposed agreement raises the same issues that Mr. Phipps criticizes with respect to the other patents involved -- Google isn't being more generous than the MPEG LA group in those respects. At any rate, conspiracy theories aren't even needed when simple business logic can explain everything. If a company believes that video codecs should be available on affordable terms, but that intellectual property holders should be compensated somehow, then it can be Google's best friend and will nevertheless attach certain conditions to a license grant. Such conditions can be monetary and non-monetary. The financial part has been resolved. While I doubt that the patent holders gave Google a freebie (considering that they don't even do this in connection with H.264, the standard they promote), Google can apparently afford those royalties without having to charge end users. There's major strategic value for Google to gain in controlling an Internet standard, as non-MPEG LA-contributor Nokia's comments on its decision to withhold a license implied. So Google picks up the bill. But the non-monetary terms shine through its proposed "VP8 Patent Cross-license Agreement".

Mr. Phipps says it's probably "unworkable" for the FOSS community, and at the very least unacceptable, that a licensee must identify itself and sign up to get a license, including downstream users since there's no right to sublicense. The FOSS approach is that someone just grants you a license and the downstream is automatically licensed, too, so you can share freely without any bureaucracy or loss of data privacy involved for anyone. But let's think about the modus operandi of those third-party patent holders, wholly apart from any theories of world domination or destruction. They want a reciprocal license (Section 5 of the proposed VP8 license). That's why Google calls this a "cross-license". It would be foolish for them to make their VP8-essential patents available when a beneficiary of their license grant can withhold a license. But they must have a reasonable degree of legal certainty that they can use the other party's back-licensing obligation as a defense to infringement claims. And that's why they need a formal cross-license agreement in place. Otherwise the licensee could later claim that it never consented to that license grant.

Google itself is a good example -- "good" only in terms of suitability, though bad in terms of behavior -- of why reciprocal-licensing commitments must be formalized. Courts in three different countries have already found Google to fail to honor grant-back obligations vis-à-vis Microsoft -- two of them formally ruled on this (England and Wales High Court, Mannheim Regional Court; both in connection with ActiveSync), and the third one (the United States District Court for the Western District of Washington) did not formally adjudge the issue because Google itself (only its Motorola Mobility subsidiary) was not a party to the relevant case, but nonetheless stated that Microsoft was an intended third-party beneficiary of the Google-MPEG LA agreement concerning H.264. And in those cases, Google had identified itself and formally signed license agreements, but it still disputed the applicability of those terms. Now imagine what would happen if someone with Google's mentality, which a U.S. judge described as "what's mine is mine and what's yours is negotiable" , refused to honor a grant-back obligation and claimed that there wasn't even an enforceable agreement in place... especially in jurisdictions that don't even recognize the concept of third-party beneficiaries to an agreement.

As for field-of-use restrictions, Mr. Phipps criticizes that the license doesn't cover you "[i]f you're writing any multipurpose code or if the way you're dealing with VP8 varies somewhat from the normal format -- perhaps you've added capabilities". Again, let me remind you that Google's own license grant under the proposed agreement comes with the same restrictions. Google itself apparently doesn't want people to modify VP8. It wants to control it. Just the way it controls Android through its arbitrarily-applied compatibility definition. Even if Google ultimately agreed with Mr. Phipps and allowed modifications with respect to its own patents, it would still have to convince those third-party patent holders to grant an equally permissive license. But in that case, someone could use patents that also read on, for example, H.264 and call it a modification of a licensed VP8 codec. Just like Mr. Phipps considers certain aspects of the proposed license "unworkable" for open source, so would it be unworkable for patent holders who generally license their patents on commercial terms to grant a license without any field-of-use restriction (and to an unidentifiable, unlimited number of beneficiaries).

The OSI President hopes that Google will improve this license agreement. But whether it can is another question. It can probably make improvements with respect to its own patents, and I believe that's what it should do at a minimum. This would affect its ability to monetize Motorola Mobility's H.264 declared-essential patents, but those have been found to have very little commercial value anyway. At least Google would show that it respects the FOSS philosophy.

Finally I'd like to talk about what the terms of the proposed license say about the need Google saw to take a license from those 11 MPEG LA contributors. After the announcement of the license deal some people argued that Google merely wanted to avoid litigation but that the agreement didn't constitute an admission of the very third-party patent infringement issues Google had denied for a long time. In other words, they said Google was paying for peace of mind, not for essential intellectual property.

It's true that sometimes license deals are struck even though the licensee is convinced of the merits of its case. That's the nuisance-value business model of certain patent trolls: they'll sue you over meritless claims and offer a license at much less than the cost of a proper defense (which is usually not recoverable in the United States). However, I believe that when all the parties to an agreement are not patent trolls but (as Judge Robart described Google in the MPEG LA H.264 context) "sophisticated, substantial technology firm[s]", then I believe there must be a strong presumption that a license deal doesn't just involve bogus claims. And that presumption is further strengthened if a licensee insisted over the years that certain claims had no merit.

Granted, a presumption, even a very strong one, still isn't proof. One needs to know the actual terms of an agreement to have clarity. None of them were announced two months ago. It's just clear that whatever Google pays is enough that Google can just absorb the costs for the downstream. The amount of money involved could be more, or even much more, than what is needed to prove that Google took those infringement allegations seriously, but if Google pays for it silently (because it can afford it), we won't know. Now at least some of the non-monetary terms are clear -- or they will be clear with definitive certainty if Google, despite criticism from Mr. Phipps and others who will agree with him (or even go beyond his criticism), can't offer a license to those third-party patents on permissive terms. The non-monetary terms demonstrate that Google took those infringement allegations seriously. Otherwise it wouldn't have drafted a license that threatens to divide the Web and FOSS communities, which in turn would have major impact on Google's own open source reputation. The non-monetary price Google is willing to pay here is so substantial that I believe it would have chosen to defend itself in court against any infringement claims (which it could have done proactively through declaratory judgment actions) if it had truly thought that all those infringement allegations were bogus, as it would have had all of us believe.

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German court stays Nokia-HTC patent case over enterprise admin feature

Judge Andreas Voss ("Voß" in German) of the Mannheim Regional Court just announced an order to stay a Nokia v. HTC patent lawsuit over a feature giving enterprise IT administrators remote control over the availability of certain features on employees' Android devices. HTC was found to technically infringe this Nokia patent, but in the court's assessment this patent is likely invalid. The infringement proceedings may resume after the Munich-based Bundespatentgericht (Federal Patent Court) has ruled on HTC's nullity (invalidation) complaint, which I believe won't happen before late 2014 at the earliest or, more likely, 2015.

EP0879538 on a "mobile terminal having network services activation through the use of point-to-point short message service" cover the feature of sending messages from a particular network (such as a corporate network) to a wireless device which then activates or deactivates certain programs or features based on what the message instructs it to do.

At the March trial I noticed that Nokia effectively addressed the court's questions concerning infringement. But the court also expressed a favorable opinion on HTC's invalidity contentions. Based on today's decision it ultimately wasn't outcome-determinative that HTC had failed to make an additional downpayment on court fees in the nullity action before the infringement trial took place. Under a rather strict interpretation of procedural law, a case is not pending merely because a complaint has been filed but only after docketing, which follows a complete downpayment of court fees by the complainant. Judge Voss did not explain today why his court stayed the infringement case nevertheless, but I know that German courts enjoy considerable discretion in granting stays of patent infringement cases. Maybe HTC made the missing payment right after the trial and the court decided to take a pending nullity action into consideration even if may not have been formally pending at the time of the infringement trial.

HTC, which is represented by Dr. Martin Chakraborty of Hogan Lovells in most Nokia cases, continues to defend itself very successfully against Nokia's patent assertions. Nokia has won one German injunction against HTC so far, which is not impactful enough all by itself to force HTC into a settlement. Nokia has asserted approximately 40 different patents against HTC in the US, UK and Germany. The latest Nokia v. HTC infringement complaint was filed in April. Most of Nokia's assetions haven't come to judgment yet. I believe that Nokia will at some point have enough leverage to collect royalties on HTC'S Android-based devices, but more than a year has passed since the original round of filings and this could go on for quite some more time (though it's unlikely to take so long that the Federal Patent Court's nullity trial on today's patent-in-suit will actually be held).

Nokia's patent enforcement efforts have a fairly high drop-out rate so far, but this is not at all unusual in this industry. For example, Apple and Samsung have been suing each other in Germany over more than a dozen different patents without winning even one infringement ruling. Various Nokia-HTC cases have already been dismissed (presumably Nokia is appealing some or all of those decisions), whie others have been stayed (several of them voluntarily). A tethering patent Nokia is asserting at the ITC appears to be the strongest patent-in-suit so far. The ITC will hold an evdentiary hearing (trial) in two weeks.

The Mannheim court had originally also scheduled a ruling on a VP8-related Nokia v. HTC case for today, but this decision has been postponed.

UPDATE: HTC statement

An HTC spokesperson issue the following comments on today's decision:

"Today, the District Court of Mannheim handed down a judgment staying claims by Nokia that HTC had infringed the German part of patent EP 0879538 entitled 'Mobile Terminal having Network Services Activation through the use of Point-to-Point Short Message Service', because of serious doubts as to the validity of the patent. HTC is naturally delighted with this decision, which serves to confirm its view that the strength of Nokia’s patent-portfolio has been greatly exaggerated.

HTC shares the view of the District Court that this patent will very likely be revoked in the on-going invalidity actions pending before the German Federal Patents Court and the English Patents Court.

To date, of the twenty-five infringement actions that Nokia has brought against HTC in Germany, three (EP 1329982, EP 1474750, and EP 0879538) have been stayed because of concerns over validity and three (EP 0812120, EP 1312974 and EP 1581016,) have been dismissed outright.

In summary, HTC has won 6 out of 7 of the judgments that have so far been handed down, in the most patentee-friendly court in Europe. Nokia's single, limited success (EP 0673175) related to technology allegedly present in certain commercial chipsets bought by HTC in good faith from third parties. In spite of all of this, Nokia has repeatedly issued statements to the media accusing HTC of copying its technology. As there is clearly no factual basis for Nokia's statements, HTC can only conclude that these statements are solely intended to damage HTC's reputation in the eyes of its customers, presumably to pressure HTC into an unfair settlement.

Historically, HTC has called upon claimants in patent actions against it to compete in the marketplace rather than the court room. Clearly, Nokia is unable to do either."

This is, as usual, some aggressive rhetoric from HTC. I'd like to comment on a couple of things:

• It's debatable whether the Mannheim Regional Court is indeed "the most patentee-friendly court in Europe" at this stage. It has, for all the right reasons in my opinion, stayed an increasing number of cases over the last 18 months. Considering that most patents are invalid as granted by the European Patent Office or the German Patent and Trademark Office, that's sensible. I believe plaintiffs nowadays sue in Mannheim because the court is very fast (far faster than the Düsseldorf court, which is according to statistics really the most patentee-friendly one in Europe) and highly knowledgeable in this field.

• I totally understand HTC's concern about its reputation and I would agree that, for the reasons stated by HTC, Nokia has not yet proven in court that HTC (as opposed to third-party suppliers) infringes a single valid Nokia patent. (HTC is licensed to Nokia's standard-essential patents; the ongoing lawsuits are all about non-SEPs.) Given the breadth and depth of its patent portfolio, Nokia may very well have a good-faith reason to believe that there are some non-SEP infringements somewhere -- but it needs to prove this in court, such as at the ITC trial starting later this month.

UPDATE 2: Nokia statement

Nokia has now also commented on today's decision:

"Nokia is pleased that the court has found that HTC infringed our patent and we look forward to demonstrating the validity of this patent. Nokia has also asserted the patent against HTC in the UK. More than 30 further Nokia patents have been asserted against HTC in other actions brought by Nokia in Germany, the US and the UK. HTC has already been found to infringe Nokia's patent EP 0 673 175 and an injunction against infringing devices is already in effect in Germany. HTC must respect our intellectual property and compete using its own innovations."

Nokia is right that it has the opportunity to convince the Federal Patent Court of the validity of this patent, and if the patent is found valid, then HTC faces a problem due to today's infringement finding. However, as I wrote further above, a Federal Patent Court decision on the validity of this patent probably won't come down before 2015.

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Google: 'FTC consent decree does not prevent Motorola from seeking an injunction' against Apple

Today the public redacted version of Google's (Motorola's) reply brief in the appeal of Judge Posner's Apple v. Motorola ruling was filed. The confidential version was submitted on Monday. Here's the brief (this post continues below the document):

13-05-13 Google (Motorola) Reply Brief in Posner Appeal

Google (Motorola) filed this brief a week after the European Commission issued a Statement of Objections (SO), a preliminary antitrust ruling, against Motorola Mobility's use of standard-essential patents (SEPs) against Apple in Germany. In its opening brief, Google had claimed that Apple was such an unwilling licensee that injunctive relief should have been available and had warned that Judge Posner's approach to damages for past infringement threatened to devalue SEPs. The reply brief obviously reinforces these points:

• With respect to the risk of low FRAND royalties (and damages) disincentivizing participation in standard-setting, Google points to Qualcomm's amicus curiae brief. There's no doubt about Qualcomm's interest in high FRAND royalties. But I don't think its particular business model must be protected in order to ensure that companies continue to develop industry standards. There are enough device makers with an interest in cellular standards that research and development will be funded even if Qualcomm's revenues and profits shrank.

• Google uses more aggressive rhetoric (but doesn't advance any new arguments) concerning Apple's refusal to accede over the years to the 2.25% royalty demand, claiming that "Apple has been intransigent since it began its infringement in 2007" and that "Apple declined to negotiate and continued to infringe while collecting massive profits", and demanding "the opportunity to seek an injunction to stop Apple's six years of ill-gotten gains from stretching into a decade or more".

  Google complains that "Apple has gained considerably from its intransigence, while Motorola still has nothing to show for the contributions it made to the standards that have enabled much of the functionality of Apple's devices". This statement contrasts with the fact that after more than two and a half years of litigation Motorola still hasn't proven that Apple infringes even one of its U.S. SEPs. Motorola prevailed on an infringement claim in Germany, but whether the relevant patent (on a countdown) is valid is another question. Motorola forced Apple to withdraw its challenge to the validity of that patent, an imposed condition that the European Commission believes violates European antitrust law.

  Considering Motorola's more than dismal SEP litigation track record against Apple, it's remarkable that it keeps insisting that "the first patent from the portfolio to be licensed [would typically] have a disproportionate value of 40 to 50 percent of the overall rate". Google wants to be paid the full rate for a portfolio of doubtful value. It may not even contain a single valid cellular SEP that Apple actually infringes. If Google at some point prevailed on one such patent, it might be the only one in the entire portfolio. Google says this is necessary for efficiency reasons relating to transaction costs:

  "Under Apple's theory, Motorola would be forced to sue on each patent in its standards-essential portfolio individually to recover the full value reflected in the previous standards-essential portfolio licenses Motorola has entered. And, in each individual case in which Motorola was successful, it could recover only the fraction of the overall rate attributable to that single patent. Therefore, under Apple's theory, a company that contributed more technology to the standard than another would have significantly higher transaction costs to recover any value for the technology it developed."

  But Judge Posner had already explained in his ruling that even without a "loser pays" rule it just doesn't make sense for an implementer like Apple to refuse a FRAND rate and to litigate if it can be avoided.

I'm now going to focus on an interesting part of Google's reply brief, which addresses Apple's claim that the controversy over injunctive relief is moot as a result of the proposed FTC-Google consent decree. I'll quote the relevant section from Google's reply brief and a related footnote:

"2. The FTC Consent Decree Does Not Prevent Motorola From Seeking An Injunction Here

Apple also raises the FTC consent decree with Google to imply that Motorola is improperly pursuing an injunction in this case. ARB [Apple's responsive brief defending the FRAND part of Judge Posner's ruling] 40-41. Apple is incorrect. The FTC has not banned Google from ever pursuing an injunction involving SEPs; instead, the FTC permits Google to seek injunctive relief for SEPs in certain specific circumstances. In the Matter of Motorola Mobility LLC and Google Inc., FTC File No. 121-0120, Decision and Order, 2013 WL 124100, at *10-11. The FTC acknowledges that '[w]e agree that injunctions may issue in certain situations even when a RAND-encumbered SEP is involved, such as when a licensee is unwilling to license on FRAND terms….' Id. at 38, fn. 14. Nothing in the consent decree prevents Google from opposing the imposition of an effectively categorical rule against injunctions involving any SEPs or from continuing to seek an injunction in a case that is already pending in federal court."

The footnote even claims that the FTC may have misrepresented (in the sense of overstating) in a public statement the effect of the proposed consent order:

"To the extent the Commission's statement suggests otherwise, it was incorrect and cannot alter the terms of the actual consent decree. In addition, Google is within its rights to seek a court's ruling that an injunction is proper in this case. If an injunction is granted, then Google understands that it would need to go through the steps outlined in the consent decree in order for the injunction to actually issue. See FTC Order at ¶ II(c) (prohibiting Respondents from 'obtaining or enforcing'--but not seeking--an injunction in a pending action 'unless and until Respondents have made Qualified Offers to the Potential Licensee[']). Because Motorola could obtain injunctive relief on remand (if it were to make Qualified Offers to Apple and ultimately prove both infringement and its entitlement to injunctive relief), the controversy is not moot, as Apple incorrectly suggests (ARB 40-41)."

Google is trying to leverage a potential loophole in the proposed FTC order when it suggests that "obtaining" injunctions is a different thing than "seeking" one. I agree that there's a difference between obtaining and enforcing, and the relevant paragraph of the proposed FTC order clearly makes that distinction:

"Respondents shall not obtain or enforce Covered Injunctive Relief based on a claim of alleged Infringement of a FRAND Patent that is pending on the date this Order is issued, unless and until Respondents have made Qualified Offers to the Potential Licensee against whom the Covered Injunctive Relief is sought. The foregoing means that it shall be a violation of this Order if Covered Injunctive Relief based on a claim of alleged Infringement of a FRAND Patent is enforced before Respondents make the Qualified Offers and the time periods specified in Paragraph IV.B. of this Order have lapsed."

The second sentence of that paragraph also draws a line where actual enforcement begins. But the difference between "to seek" and "to obtain" is just whether one succeeds with a petition. If Google argues that the FTC order bars it from "obtaining" -- but not from "seeking" - injunctions, it says that the pursuit of injunctive relief is fine as long as it doesn't succeed. Google believes it's fine if it makes a licensing offer in accordance with the proposed consent decree anytime before a court actually grants injunctive relief. But Google doesn't always control when a court makes this decision. If things happen quickly, it may not have time to make the Qualified Offer the proposed FTC consent decree requires it to make.

I've looked up all occurrences of the verb "to seek" in the proposed FTC consent order that relate to injunctive relief:

1. Paragraph II.E (just two paragraphs down from II.C, which Google cites to) defines circumstances under which "[n]othing in this Order shall prohibit Respondents from seeking Covered Injunctive Relief".

2. Paragraph III.F: "to file a claim seeking, or otherwise obtain or enforce, Covered Injunctive Relief"; similar: the first paragraph of Section IV and paragraph IV.F, which elsewhere defines criteria for what happens "prior to seeking the Covered Injunctive Relief"

3. Paragraph IV.C defines when "Respondents shall be relieved of their obligations not to file a claim for, or seek or enforce, Covered Injunctive Relief". Frankly, I don't see how "to file a claim for [injunctive relief]" is different from "seek[ing]" it.

4. Paragraph V.B makes it a requirement for a purchaser of any of Motorola's FRAND-pledged SEPs "not to seek Covered Injunctive Relief on the basis of Infringement of the FRAND Patent except to the extent Respondents would be permitted to seek such Covered Injunctive Relief by the terms of this Order".

5. The letter Google has to send to alleged infringers says:

   "Under the Order, Google generally cannot seek an injunction or exclusion order against [POTENTIAL LICENSEE] while the above action is ongoing. However, Google can demand that, as a condition of not seeking an injunction or exclusion order, Google and the Potential Licensee make the following binding commitments that cannot be revoked: [...]"

   It also says at the very end that if the recipient of the letter does not agree to the terms, "GOOGLE MAY BE ABLE TO SEEK AN INJUNCTION OR EXCLUSION ORDER AGAINST YOU WITHOUT VIOLATING THE ORDER."

It's hard to see why an acquirer of any of those SEPs should be barred from "seek[ing]" an injunction if Google itself has (as it claims) the right to do so. That adds to my impression that what the FTC wanted to prevent is that Google would "seek" injunctive relief, and where it says "otherwise obtain or enforce", it means to close potential loopholes. And I think the offer letter (which forms part of the proposed consent order) provides the clearest indication that Google is barred from seeking (and not just obtaining and enforcing) injunctive relief. There are exceptions in the proposed FTC consent order under which Google is allowed to seek injunctive relief. I don't believe any of them applies here, but even if Google was right and one or more exceptions applied, I can't see a clear indication in the FTC consent order that it's fine to "seek" injunctive relief as long as you don't succeed (and "obtain" it) and, subsequently to succeeding, "enforce" it. Should there be any ambiguity about this, then the FTC still has the opportunity to provide more clarity -- in the consent order itself (which has yet to be finalized) and not just in a public statement that, as Google accurately notes, can't alter the agreement.

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Google seeks to preclude expert from testifying that Android infringes Nokia's tethering patent

Of the five Nokia patents that prompted Google's intervention in the ITC investigation of the Finnish company's patent infringement complaint against HTC, four have been dropped, which speaks to HTC and Google's defensive strength. There are also three other patents in play that Google isn't interest in, but the one patent due to which Google is still active in this case is of exceptional importance: U.S. Patent No. 5,884,190 on a "method for making a data transmission connection from a computer to a mobile communication network for transmission of analog and/or digital signals", which covers tethering, has already been interpreted by an ITC judge consistently with Nokia's suggestions, substantially increasing the likelihood of an infringement finding. That claim construction ruling drew my attention to this particular patent. I was reading the decision on a train back from Mannheim, where I attended another Nokia patent trial that day, and I immediately felt that this patent was going to be the most important one at least in this ITC investigation and possibly also in the whole Nokia-HTC dispute spanning three countries (US, UK, Germany). Here's a drawing from the patent document:

Yesterday Google brought a motion for limine with a view to the upcoming evidentiary hearing (ITC trial) that focuses on the tethering patent. Even though Google (i) proudly demonstrated tethering as an Android feature a couple of years ago, (ii) discusses it as an Android feature on its support website, and (iii) would no longer be an intervenor in this investigation if not for this patent, Google doesn't want the ITC to make a finding that "Android" infringes. Google doesn't "want" HTC to be found to infringe either, but from Google's vantage point that would be the lesser evil than an infringement finding relating to Android in general. An import ban would still be limited to HTC's devices, but other Android device makers also need a license to some of Nokia's non-standard-essential patents.

This is the objective of Google's motion:

"Google [...] moves to strike and exclude Nokia's proposed expert, Theodore Rappaport, from providing testimony or offering any opinions relating to: 1) Google's Android operating system or any Google application, software or products/services, and whether it allegedly satisfies any portion(s) of asserted claim 1 of U.S. Patent No. 5,884,190 ('the '190 patent'); and 2) on what constitutes prior art to the '190 patent.

Google's argument is procedural, not substantive. Google says:

• "Nokia's operative Amended Infringement Contentions do not identify any Google product as an accused product nor implicate Google in any indirect infringement allegations".

• "Dr. Rappaport's expert report contains no citations or references to Google's Android operating system, or any Google application, software or products/services."

• "In fact, Dr. Rappaport confirmed during his deposition, that he neither reviewed nor asked to review specific Google documents, nor did he request or actually review any Google source code in forming his opinions. [...] Since both Dr. Rappaport's expert report and testimony are devoid of any specific references to Google's Android operating system or any Google application, software or products/services, and given that Dr. Rappaport has no opinion on whether Google's Android operating system or any Google application, software or products/services allegedly satisfies any portion(s) of asserted claim 1 of the '190 patent, Dr. Rappaport's testimony relating to this issue should be excluded.".

Whether this particular expert will be allowed to testify on Android's alleged infringement is going to depend on what was said by when and whom in this particular ITC investigation. But in practical terms, if HTC's Android-based devices are found to infringe this tethering patent, Google's Android ecosystem as a whole is going to have a problem. Based on the scope of the asserted claim 1 and the claim construction based on which the ITC judge is now going to determine infringement, I can't see why HTC's tethering would infringe and, for example, Samsung's (since this is the market leader and also the Android device maker whose tethering feature I use very frequently) would not.

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Apple wants to add Galaxy S4 to second patent case against Samsung in California (spring 2014 trial)

Late on Monday, Apple and Samsung submitted statements in response to Judge Koh's April 24, 2013 order to narrow their second California case. Narrowing will occur in several steps until the spring 2014 trial. Ultimately, by February 6, 2014, the parties will have to limit their asserted patents claims to five (per side) and their accused products to ten (per side).

The purpose of the responses Apple and Samsung submitted yesterday was to identify 22 accused products per side. The filings reveal a major new disagreement: Apple has analyzed the Galaxy S4, Samsung's new top-selling product, and "has concluded that it is an infringing device and accordingly intends to move for leave to add the Galaxy S4 as an infringing product". Apple's current list of 22 accused products does not include the S4, but a footnote contains the statement from which I just quoted. Apple says it will drop another product from its list of 22 accused products once it has permission to add the S4 to this litigation.

The parties previously had some disagreements on the accused products in this action, but found common ground in January. Apple's announcement of its plan to include the S4, which "began shipping in late April 2013" according to Apple's filing, comes at a point in time when the court actually wanted the parties to drop, not add, products from the list. But given the commercial significance of the S4, Apple's desire is understandable, and the trial is still more than ten months out.

Another disagreement between the parties is how many stock keeping units can be grouped as a single product with a view to the limitations in this case. Samsung says it "heavily customizes software to carrier specifications" and considers different versions of the same product line that are sold through different carriers as different products. Samsung is right that this is also the way it worked at the 2013 trial, but it's unclear whether Samsung's customizations have any bearing on the infringement analysis the jury will have to perform next year. Apple says that it asked Samsung to identify relevant differences but "Sasmung refused". Apple also notes that its preliminary injunction against the Galaxy Nexus also related to all versions "even though that product was on more than one carrier". And Samsung's own product list does not list different carrier-specific versions of the iPhone separately. Apple furthermore criticizes that Samsung does not list separate generations of the different Mac product lines.

The court had (as Apple recalls in its filing) encouraged the parties to reach an agreement on "representative products", simplifying things for the jury by letting it evaluate only one product if multiple devices implement an accused feature in the same way. It's unlikely Samsung will agree to this as it wants to capitalize on the fact that it offers many more products than Apple does. Unless the court orders a "representative products" approach, or at least makes it very clear to Samsung that it will order this if necessary, I don't think Samsung is going to do Apple the favor to let it accuse (and potentially collect damages on and seek injunctions against) more products than otherwise. The dispute the parties are having over the S4 could make the court realize that it needs to resolve the "representative products" issue sooner rather than later.

Based on yesterday's filings, Apple accused the following Samsung products (as I wrote above, one of them would have to be dropped to make room for the S4 if the court allows its addition):

1. Admire

2. Captivate Glide

3. Conquer 4G

4. Dart

5. Exhibit II 4G

6. Galaxy Nexus

7. Galaxy Note

8. Galaxy Note 10.1

9. Galaxy Note II

10. Galaxy Player 4.0

11. Galaxy Player 5.0

12. Galaxy Rugby Pro

13. Galaxy S II

14. Galaxy S II Epic 4G Touch

15. Galaxy S II Skyrocket

16. Galaxy S III

17. Galaxy Tab 7.0 Plus

18. Galaxy Tab 8.9

19. Galaxy Tab 2 10.1

20. Illusion

21. Stratosphere

22. Transform Ultra

This is Samsung's current list:

1. iPhone 3G

2. iPhone 3GS

3. iPhone 4

4. iPhone 4S

5. iPhone 5

6. iPad

7. iPad 2

8. iPad 3

9. iPad 4

10. iPad mini

11. iPod Touch (5th generation)

12. iPod Touch (4th generation)

13. iPod Touch (3rd generation)

14. MacBook Air

15. MacBook Pro

16. iMac

17. Mac mini

18. Mac Pro

19. iTunes (including iTunes Match)

20. iCloud

21. Apple TV (3rd generation)

22. Apple TV (1st generation)

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Apple refers to Judge Robart's rate-setting opinion in two Federal Circuit FRAND appeals

It's easily overlooked that Apple actually has two FRAND cases involving Google's Motorola Mobility on appeal before the Federal Circuit:

1. The big one everyone in this field knows is the "Posner appeal", in which Google is fighting for access to injunctive relief and for high FRAND royalty levels.

2. The other one relates to a FRAND obligations enforcement case in the Western District of Wisconsin, which was dismissed (ultimately without prejudice) in November 2012. Apple is appealing the dismissal, and Google is appealing certain summary judgment decisions adverse to its interests.

   Last week the court denied a Google motion to terminate or transfer this appeal for lack of jurisdiction. While jurisdictional issues will still be addressed in the parties' briefs, a fair amount of briefing had already been submitted and Google's case for termination or transfer was apparently not found strong and clear enough to warrant an immediate termination or transfer.

It was always clear that Judge James L. Robart's Microsoft v. Motorola FRAND rate-setting opinion would set a key precedent throughout and beyond the United States (this was predictable even before it issued because no one had done this before) and, once everyone was able to see how well-considered and logically-structured it is, that many courts and parties (as well as policymakers and regulators) would find it instructive.

The most obvious third-party beneficiary of this is Apple, which has to deal with very similar conduct on Google's (Motorola's) part as Microsoft. In terms of the standards at issue in the disputes, there's an overlap with respect to IEEE 802.11 (WiFi). In the Apple cases the emphasis is, however, on cellular (ETSI) standards, which aren't relevant to Microsoft, where Motorola mostly focused on the H.264 video codec. I haven't seen Motorola assert H.264 video codec patents against Apple, though it uses this format extensively as well. Now that the low value of Motorola's H.264-related patents (they're mostly about interlaced video, which is -- no kidding -- a technology invented around the year 1940 that has lost relevance in recent decades) has been exposed by a court ruling, it may not even be economically wise for Google to assert those patents against Apple.

Yesterday (Friday) Apple pointed the United States Court of Appeals for the Federal Circuit to Judge Robart's rate-setting opinion in both Motorola FRAND appeals:

1. In the "Posner appeal", Apple attached the entire opinion to a notice of supplemental authority and explained its bearing on the "Posner case" as follows:

   "Apple's Response and Reply Brief ('RRB') argues that the district court properly held that the 'purpose of the FRAND requirements … is to confine the patentee's royalty demand to the value conferred by the patent itself.' RRB 25. Judge Robart concurs, stating that to determine a royalty rate, 'it is critical to consider the contribution of the patented technology apart from the value of the patent as the result of its incorporation into the standard, the latter of which would improperly reward the [declared Standard Essential Patent ('SEP')] owner for the value of the standard itself. Rewarding the SEP owner with any of the value of the standard itself would constitute hold-up value and be contrary to the purpose behind the RAND commitment.' [...]

   Apple argues that to value an SEP, the district court properly focused on the cost to obtain a license 'just before the patented invention was declared essential.' RRB 27-28. Judge Robart concurs: 'parties to a hypothetical negotiation under a RAND commitment would consider alternatives that could have been written into the standard instead of the patented technology.' [...] Judge Robart also agrees that licenses negotiated 'under the threat of a potential infringement lawsuit' are not 'reliable indicator[s] of a RAND royalty rate,' as Apple has argued. [...]

   Finally, Apple argues that Motorola provided no evidence that it was entitled to a large royalty award for its 'trivial inventions.' RRB 1, 38-41. Consistent with that point, Judge Robart states that a proper FRAND rate must take into account that Motorola's SEPs 'constitute only a sliver of the overall technology incorporated into' the relevant standards. [...]"

   The term "trivial inventions" relates to the patents Motorola had declared essential to the standards at issue in the Microsoft case, and Judge Robart actually thought that Motorola's cellular SEP portfolio is (though he didn't analyze it in detail) more powerful than its H.264 and IEEE 802.11 patents. In light of the track record of Motorola's wireless SEPs I'm not sure Apple infringes even a single valid Motorola SEP of that kind, but in general it's certainly correct that Motorola played a greater role in the development of cellular standards than the standards at issue in the Microsoft case. The key thing for Apple's purposes in the "Posner appeal", however, is that the methodology used by Judge Robart is consistent with its positions.

2. In the "Wisconsin dismissal appeal", Apple filed a motion for an extension of time. The way Apple interprets the rules, its opening brief would normally have been due on June 17, 2013, but the court ordered Apple to file it 21 days after the denial of Google's motion to terminate or transfer, i.e., on May 24, 2013. Apple now requests a 60-day extension of time from that date (to July 23, 2013). Motorola is fine with this extension provided that Apple won't oppose its own request for an equivalent extension, which it may bring in the future and which Apple told Motorola it wouldn't oppose. If both requests are granted, Motorola's initial brief will be due on November 5, 2013 (by coincidence, precisely one year after the dismissal of the Wisconsin trial).

   The Federal Circuit usually grants unopposed requests for 60-day extensions. Still, a moving party has to state reasons, and in these big and complex cases this isn't hard. Apple points to the sheer volume of documents at issue and stresses that "[t]Ten separate counts may be relevant to this appeal", only one of which was about rate-setting:

   "Notably, Judge Robart of the U.S. District Court for the Western District of Washington recently issued a careful 207-page opinion that addressed just one of the issues presented in this appeal. See Microsoft Corp. v. Motorola, Inc., No. 10-1823-JLR (W.D. Wash. Apr. 25, 2013), Dkt. No. 681 (discussing proper method for computing a FRAND royalty)."

   This Federal Circuit appeal isn't going to result directly in a Judge Robart-style rate-setting decision. But this would happen on remand if Apple achieved a reversal of the dismissal.

The influence of Judge Robart's ruling is starting to show on dockets like these two. Rate-setting by courts is the way to go if parties can't agree; arbitration is only acceptable if both parties voluntarily consent to it and to all of the relevant terms ("voluntarily" meaning without the threat of an injunction that a couple of Google-friendly professors from California propose in order to dislodge the rule of law for the benefit of extortionist SEP holders).

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