Friday, August 1, 2014

Microsoft sues Samsung over Android royalties -- a contract dispute, not an infringement case

Today Microsoft filed a contract lawsuit in the Southern District of New York against Samsung over the companies' Android-related patent license agreement, which was concluded in 2011. So far only Microsoft's version of the story (the first link above) is known: Samsung allegedly doesn't believe to be bound by the 2011 agreement as a result of Microsoft's acquisition of Nokia's handset business, a position that Microsoft describes as "meritless". The most positive aspect of the announcement is that Microsoft still hopes to continue its partnership with Samsung, despite this disagreement. As a consumer, I hope so, too.

Microsoft would certainly have preferred to bring this complaint in the Western District of Washington (where it prevailed over Motorola in another contract matter, which is now on appeal) but presumably the contract required any lawsuits to be filed in New York.

Microsoft's position on the interdependencies of the Nokia acquisition with its Samsung license agreement is no secret. Back in September 2013 (when the Microsoft-Nokia deal was announced) I blogged about some Microsoft slides relating to patent licensing in the Nokia context, and here's the key bullet point again:

"Microsoft's agreement with Samsung will provide coverage for these additional devices without added payments"

It's not hard to see why Microsoft would like this to be the case, and why Samsung would not want it to be the case. The net effect would be that

  • Samsung would pay Microsoft per-unit royalties on all Android devices,

  • Microsoft would pay Samsung nothing for the use of any Samsung patents (such as wireless standard-essential patents) in the former Nokia devices, and

  • Nokia is, as a result of its Microsoft deal, free to collect patent royalties from Samsung.

This is obviously not the kind of outcome that Samsung could have foreseen when it entered into the Microsoft license agreement in 2011. But the key legal question is going to be whether the Microsoft-Samsung contract covers this situation regardless of whether Samsung could have reasonably anticipated it.

I guess Microsoft will do all in its power to obtain sealing orders for its contract terms, but it won't be able to get everything sealed, especially not in the event that the matter ultimately goes to trial (I guess it won't because they will settle beforehand, but you never know). GeekWire has published a redacted version of Microsoft's complaint.

Microsoft's Android patent licensing program is a huge dealmaking success. The outcome of Microsoft's Android-related patent enforcement efforts against Motorola is a separate story. Microsoft is currently able to enforce one patent against Motorola's Android devices. It won three injunctions in Germany but all three patents -- and a few more that Motorola hadn't been found to infringe in the first place -- have since been declared invalid by the Federal Patent Court of Germany (the related decisions are presumably being appealed). In the U.S., Microsoft asserted nine patents against Motorola at the ITC. The ITC ordered an import ban over one of them, and the Federal Circuit upheld that decision and sided with Microsoft on a second patent, but that one had already expired, so Microsoft can only seek damages for past infringement over that one.

It's possible that Samsung now feels it would have been a better choice to do things the Google-Motorola way and take its chances in court than to agree three years ago to pay royalties. Motorola has been defending itself against Microsoft for almost four years, and apart from being temporarily unable to ship products into the German market (for four months according to Motorola's counsel's representations in court), Motorola has been doing just fine -- unless Microsoft at some point gets decisive leverage over Motorola, in which case the ultimate conclusion could be that licensing would have been a better choice than litigation, though as of now, Motorola has almost certainly spent much less on its defense than it would have paid in royalties. And, by the way, Samsung and Motorola use the same law firm (Samsung against Apple, maybe now also against Microsoft; and Motorola against Microsoft as well as Apple): Quinn Emanuel.

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Apple responds to Samsung appeal of first California ruling, defends jury verdict all the way

On Monday, Apple had a deadline for its opening brief in the appeal of the final ruling in the first Apple v. Samsung case and somewhat surprisingly dropped its cross-appeal. As a result, Apple's opening brief, filed later in the day, was all about defending the jury verdict. The part that was not surprising is that Apple decided to consistently defend the jury verdict rather than run into any contradiction with itself by saying the jury got things wrong there it sided with Samsung but was absolutely right wherever it agreed with Apple. The unexpected part is that Apple finally gave up its pursuit of a permanent injunction in its first Samsung case. Apple could still seek an injunction over the same patents in connection with different products (and then try to present stronger evidence of irreparable harm), but a new complaint and a whole new liability ruling would be needed (which would take time).

Apple's defense of the 2012 jury verdict would be futile if the things certain jurors later told the media (about intentional ignorance of the prior art, for example) were a basis for setting the verdict aside. Fortunately for Apple, the United States Court of Appeals for the Federal Circuit, while aware of what the media reported, will (have to) rule on a different basis.

I don't disagree with Apple philosophically. It's true that Apple presented a pretty strong "copying" story at the 2012 trial, a story that would likely have persuaded many other juries to come down on Apple's side, even if not necessarily to the same extent. This year's trial in the second California case between these parties didn't go nearly as well for Apple because there was a bit of a disconnect between Apple's copying rhetoric on the one hand and the merits of its infringement assertions on the other hand.

There's a lot that one could say about a brief of approximately 100 pages (Samsung had also been granted additional pages for its opening brief in this appeal). I'll just share a few observations below the document:

14-07-28 Apple Responsive Brief to Samsung Appeal by Florian Mueller

Usually the table of authorities does not warrant any comment. Here, however, it's interesting that Apple's brief cites to writings by several of the 27 law professors who filed an amicus curiae brief a few months ago in support of Samsung's efforts to get the design patents-related part (i.e., the bulk) of the $929 million damages award reduced. In the "Other Authorities" section you can find writings by Professors Thomas Cotter (author of the Comparative Patent Remedies blog, which I have recommended previously), Mark Lemley, Mark McKenna & Katherine Strandburg, Michael Risch, and Ryan Vacca. It's a nice idea that Apple tries to leverage previous writings by those amici against their recent brief. (I'm sure the amici would disagree that there is any contradiction between their earlier writings and their brief.)

With respect to design patent-specific legal issues, I tend to agree with Apple that the concept of "purely functional" design elements should be interpreted more narrowly than Samsung suggests in its brief -- protection should be denied only if a design element is truly "dictated" by functional requirements. (If you have read my posts on Oracle v. Google, you know that I have a similar perspective on functional restrictions in connection with software copyright.)

Apple argues that there is no "risk of double recovery" if an unapportioned disgorgement of infringer's profits is awarded. I still believe that Samsung and its amici are right that unapportioned disgorgement is nonsensical in a world in which products, unlike some old non-tech products such as carpets, may be found to infringe more than one design patent at the same time. Apple focuses on the scenario in which "a patentee with multiple overlapping design patents could recover an infringer's profits several times over." Apple indeed didn't try this: it sought a disgorgement of infringer's profits (and not a multiple thereof) despite asserting, and establishing in the eyes of the jury, infringements of multiple design patents. But what if the same product infringes two (or more) design patents held by two (or more) entities? Apple does address this possibility: "if that hypothetical concern ever materialized, an infringer could always invoke impleader, as one of Samsung's amici [Prof. Lemley] explains." This does not seem to be a great solution, and in any event, even if a procedural solution existed, there is a conceptual problem with a rule that results in excessive remedies. Also, let's not forget that the issue is not only one of potential infringement of multiple design patents but that a high-tech product involves other intellectual property rights than just design patents. Apportionment is the only sensible solution, and it appears that the jury (which granted Apple less than half of what it wanted) somehow also felt that a complete disgorgement was over the top, but Apple now seeks to defend the verdict and, therefore, the instructions Judge Koh gave two years ago.

There are two issues with the first sentence of the introductory part (page 2) of Apple's brief, both of which show that Apple now attempts to defend a mostly design patent-based damages award by conflating design and technology:

"Apple spent years and millions of dollars developing innovative designs and features for its iconic iPhone and iPad, which revolutionized the smartphone and tablet computer markets."

First, while the iPhone and the iPad undoubtedly revolutionized the smartphone and tablet computer markets (in fact, the iPad even created the tablet computer market, practically speaking), the designs per se (which the bulk of the $930 million damages award relates to) did not revolutionize anything.

Second, the designs themselves only cost "millions". That is not a strong point when asking an appeals court to uphold a damages award amounting to almost a billion dollars. The million-billion discrepancy actually indicates that there is a risk of massive overcompensation in this case.

Having read Apple's appellate brief, I actually feel more strongly than before that the reduction of the damages award Samsung is seeking is really warranted.

Finally, I have to acknowledge that I had previously missed an important detail that footnote 22 (page 78) has now drawn my attention to: the USPTO's rejection of the '915 pinch-to-zoom API patent claims (which Apple is appealing, but which the examiner is still defending) is based on partly different prior art than theone Samsung presented at the 2012 trial. Technically, this could help Apple defend the patent in the appeal of the California ruling despite whatever else is going on in the USPTO reexamination proceedings. Still, the fact of the matter is that the '915 patent, based on where things currently stand at the USPTO, would not have been granted in the first place if the examiner had been aware of all of the relevant prior art. There are sometimes multiple ways to invalidate a given patent, so the '915 patent is still at risk in this appeal, and invalidation would most probably be the correct outcome.

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Monday, July 28, 2014

Google preparing to appeal Oracle's copyright win to Supreme Court, Oct. 6 deadline for petition

Last month Google decided not to seek an en banc (full-court review) of Oracle's appellate victory in the high-profile Android-Java copyright case (initial reaction to ruling, follow-up, and detailed refresher Q&A), resulting in a formal mandate to the district court. At the time I wrote it was "still not certain that proceedings [would] resume in district court in the very short term," given that "Google [could] file[] a petition for writ of certiorari with the Supreme Court of the United States." And that's what's apparently going to happen now (as always, absent a settlement).

On July 9, Google submitted to the Chief Justice of the United States an application to extend the time to file a petition for a writ of certiorari from August 7, 2014 (i.e., three months after the Federal Circuit opinion) to October 6, 2014. The Chief Justice granted the application the following day (July 10).

I have explained before (see the links further above) why I think the Federal Circuit got the copyrightability decision absolutely right. But Google and a number of Google-aligned individuals and organizations apparently can't accept the Federal Circuit decision as the last word. Whether the Supreme Court will ultimately hear the case is another question. A high-profile case it definitely is, and an important issue -- but the Federal Circuit, unlike the district judge, correctly interpreted the law (including the Ninth Circuit opinions in the Sega and Sony fair-use cases), and from a policy point of view, this outcome is in the interest of honest software developers seeking a reasonable degree of intellectual property protection for the most creative parts of their creations. Copyrightability is neither the only level at which interoperability can be ensured nor the best option because denying copyrightability to highly-creative, original, declaring API code would do way too much damage to software copyright. The best decision the Supreme Court will be able to make after Google files its petition is to deny certiorari in order for the case to resume in district court at the earliest opportunity.

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Apple drops cross-appeal, forever accepts denial of injunction in first Samsung case

While a global, comprehensive settlement of the patent spat between Apple and Samsung has not materialized yet, the dispute continues to lose steam every month, and noticeably so. Not only has no new complaint between these parties been filed in about two years (unless something was filed somewhere in the world without being reported in the media) but the parties' litigation fatigue is increasingly visible at the appeals courts. Last month they agreed to drop each other's appeals of the final ITC ruling on Apple's complaint. Today Apple filed a motion with the United States Court of Appeals for the Federal Circuit to drop a cross-appeal in its first California case against Samsung. The deadline for Apple's opening brief would have been today.

The cross-appeal Apple has now dropped (which Samsung was fine with) had been filed in March. While the 2012 California jury trial had gone extremely well for Apple (in front of a jury that thought looking at prior art references was just a waste of time), Judge Koh had just denied Apple a permanent injunction against Samsung -- for a second time -- over the multi-touch software patents it asserted in the 2012 trial (where other intellectual property rights were also at issue). Apple had filed a renewed motion after a partly-successful, but ultimately insufficiently-successful, appeal to the Federal Circuit. It could now have tried to convince the Federal Circuit that Judge Koh applied a standard that was too high, but apparently Apple has decided to focus on its pursuit of a permanent injunction in the second California case, in which a trial was held a few months ago (and a hearing on the parties' post-trial motions, including Apple's motion for permanent injunction, took place a few weeks ago, with a ruling most likely coming down this summer).

Apple's withdrawal of its cross-appeal changes nothing about Samsung's own efforts to get the 2012 jury verdict overturned in whole or in large parts. Those efforts continue regardless.

Here's the text of Apple's motion:

Pursuant to Federal Rule of Appellate Procedure 42(b), Plaintiff-Cross Appellant Apple Inc. ("Apple") moves to voluntarily dismiss its cross-appeal, No. 2014-1368.

Apple further moves to reform the official caption of the remaining appeal (No. 2014-1335) to reflect the dismissal of Apple's cross-appeal.

Counsel for Apple has conferred with counsel for Samsung Electronics Corporation, Ltd., Samsung Electronics America, Inc., and Samsung Telecommunications America, LLC (collectively, "Samsung") regarding the substance of this motion. Samsung does not oppose the relief requested in this motion and will not file a response.

Apple accordingly requests that the Court grant its motion and dismiss its cross-appeal and reform the official caption to reflect the dismissal. A proposed order is attached.

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Wednesday, July 16, 2014

U.S. patent examiner stands by rejection of Apple's pinch-to-zoom API patent claims

A hearing was held last week on the parties' post-judgment motions in their second California case. There wasn't any new information in the reports I read (the fact that Apple's injunction request is feature-centric is old news), so the next step there will probably be Judge Koh's ruling on those motions. While I don't know what Judge Koh indicated at the hearing, the validity of certain patents asserted by Apple continues to be a key issue (even the key issue, at least on the liability side) -- not only in the post-trial proceedings in the second case but also in the first one (on appeal).

On Tuesday, Samsung filed a notice with the United States District Court for the Northern District of California regarding recent developments in Apple's PTAB (Patent Trial and Appeals Board) appeal of an examiner's rejection (on reexamination) of the '915 pinch-to-zoom API patent, particularly its claim 8, which a Silicon Valley jury found Samsung in 2012 to have infringed and deemed valid (at least one juror later told reporters the jury didn't even look at the prior art after evaluating the first one of a dozen patents-in-suit).

The relevant rejection was communicated on a "final" basis about a year ago. Apple kept on trying to salvage the patent, but the examiner didn't change his stance. In December 2013, Apple's only remaining option was to appeal (within the USPTO, for the time being) this rejection. Meanwhile, Judge Koh has handed down an appealable final judgment in that first California Apple v. Samsung case, the parties appealed, and Samsung has already filed its opening brief with the Federal Circuit (the part concerning design patent damages -- the bulk of the billion-dollar verdict, or "$929 million verdict" after a limited damages retrial, to be precise -- has significant support in the U.S. legal community). If the Federal Circuit also held claim 8 of the '915 patent invalid, that fact alone would require a third trial in the first Apple-Samsung case (and unlike in the second one, the majority of all products would be at issue in that event).

Samsung's notice is nonjudgmental. It merely informs the court of three filings: Apple filed its appellate brief with the PTAB in February; the examiner handling the reexamination filed an answer in May; and about two weeks ago Apple filed a reply brief. The examiner could have withdrawn rejections or brought up new grounds of rejection, but elected to do neither. He stands by last year's decision (based on which the claim-in-suit is anticipated by one prior art reference and -- though one ground would be enough to render it invalid -- additionally obvious over the combination of two other prior art references) and defends it against Apple's allegations that his reasoning is flawed. The next step is going to be a PTAB hearing.

All three filings with the PTAB are attached to Samsung's notice (just in case you're interested in the details):

14-07-15 Samsung Notice Re. Developments in Apple's '915 PTAB Appeal by Florian Mueller

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Thursday, July 3, 2014

Samsung argues two Apple patents-in-suit are invalid in light of Alice v. CLS Bank decision

Two weeks after the Supreme Court of the United States handed down its opinion in Alice v. CLS Bank, Samsung has just filed a motion with the United States District Court for the Northern District of California, requesting permission to file a supplemental brief that argues two of the patents on which Apple prevailed at the recent California trial are invalid because they don't constitute technological innovation and merely represent generic computer implementations of abstract ideas. The patents Samsung is challenging on abstract subject-matter grounds are the '959 "unified search" patent and the '721 slide-to-unlock patent. Samsung has attached to its motion a copy of the brief it wishes to file (this post continues below the document):

14-07-03 Samsung's Proposed Supplemental Brief Re. Alice Opinion by Florian Mueller

Considering that the same district court allowed Apple to leverage a couple of recent Supreme Court opinions concerning fee-shifting in connection with its pursuit of a recovery of attorneys' fees from Samsung, it would seem just fair for Samsung to be allowed to make an Alice argument now, just in time before Judge Lucy Koh will decide on the parties' motions for judgment as a matter of law (JMOL) following the recent $119 million jury verdict (which was disappointing enough for Apple to request a retrial).

Samsung notes that the United States Patent and Trademark Office (USPTO) deemed the Alice decision important enough to provide related instructions to its examiners. That USPTO document does show that the Alice decision was important, but it also states that Alice "neither creates a per se excluded category of subject matter, such as software or business methods, nor imposes any special requirements for [patent-]eligibility of software or business methods." In my opinion the problem for patent holders is not in what the Alice decision says. It's in the fact that the Supreme Court has recently issued a number of decisions that weaken patent rights and run counter to the Federal Circuit's approach. It will take time before it's clear how much will really change. Samsung is not the first litigant to point to Alice, and countless others will do so in the years ahead.

I have formed a first and preliminary opinion on the merits of Samsung's abstract subject-matter arguments:

  • I tend to agree with Samsung as far as the '959 "unified search" patent is concerned. As Samsung notes, that patent "describes using 'heuristics' – something Apple considers simply 'good ideas' – to locate information in multiple locations". It would indeed be hard to reconcile with the spirit and the letter of the Supreme Court's Alice decision to let Apple monopolize "the abstract concept of 'some rule of thumb,' or the use of 'good ideas' or 'rules of thumb' to find information."

  • I doubt that Alice is an appropriate basis -- and it's certainly not the best basis -- for striking down the slide-to-unlock patent. Samsung argues that "moving a lock into an unlocked position" is an "abstract concept" and a "basic 'method of organizing human activity'" that is not patent-eligible in this post-Alice world. I don't think so. Unlocking a device is a reasonably technical activity to me.

    That said, the slide-to-unlock patent should be invalidated, but on the grounds of anticipation (non-novelty) or obviousness. After ten European judges determined that Apple did not deserve a patent on slide-to-unlock in light of the prior art, Judge Koh would be the first judge in the world to find this thing patentworthy if she denied the related part of Samsung's JMOL motion. Such a decision would not reflect favorably on the quality standards of the U.S. patent system.

[Update on July 4, 2014] Judge Koh has just asked Apple to respond to Samsung's motion on July 17 (with a limit of 10 pages) and given Samsung five pages for its reply brief, which will be due on July 24. For now, Judge Koh does not see a need for a hearing on this matter. [/Update]

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Thursday, June 19, 2014

Supreme Court ruling in CLS Bank v. Alice makes 'generic' the new magic word for software patents

The Supreme Court of the United States just handed down its opinion in Alice v. CLS Bank, a case that some people (including the appellant) misportrayed as a case that was fundamentally about whether or not computer-implemented inventions are patent-eligible. In February I explained why this case was more of a "Bilski Reloaded", and I later commented on the March 31 Supreme Court hearing, predicting that software would undoubtedly remain patent-eligible. And indeed, today's decision is narrowly focused on issues that relate to abstract ideas such as business methods and does not provide any guidance with respect to the patent-eligibility of technical inventions involving software.

I have filed a U.S. patent application (and a simultaneous PCT application) on a computer-implemented invention and will file a couple more soon, but those fighting this category of patents also appear to agree that software patents haven't been abolished, judging by the initial reactions I've seen on Twitter and certain websites.

I'll keep this brief because everything turned out just as expected and because this ruling hasn't really changed anything. There's only one observation -- the one I already stated in the headline -- I wish to share. It's clear that post-Alice those challenging software patents and those defending them will have a favorite word and it is "generic". It's all over the SCOTUS opinion, in most instances as a qualifier before the word "computer" and sometimes before "computer implementation". And in at least one instance, "generic" itself has a qualifier:

"Wholly generic computer implementation is not generally the sort of 'additional featur[e]' that provides any 'practical assurance that the process is more than a drafting effort designed to monopolize the [abstract idea] itself."

The word "generic" also appeared in the Federal Circuit opinion(s), but in different combinations. The Supreme Court linked it to "computer implementation" because the question on appeal was whether the Federal Circuit ruling rendered all computer-implemented inventions patent-ineligible.

In Europe, where software is excluded from the scope of patent-eligible subject matter by statutory law (Art. 52 of the European Patent Convention), the equivalent to "generic" is "as such": software as such is not patentable, but technical inventions involving software are (making "technical" the magic word in Europe). In Europe there's already a rich body of case law concerning what is or is not technical. In the U.S., courts are now going to have to figure out again and again the meaning of the term "generic". Those applying for or defending software patents will argue that their inventions are not "generic" computer implementations of abstract ideas. Those challenging such patents will try to define "generic computer implementation" as broadly as possible and argue that every software patent they attack involves previously known computing technology and an abstract idea.

The Supreme Court clearly says that it does not want the exclusion of abstract ideas from patent-eligible subject matter to "swallow all of patent law". No doubt about that intent, but this won't dissuade some from trying to interpret the Supreme Court ruling overbroadly. It's a bit unfortunate for those seeking or defending software patents that there hasn't been a recent Supreme Court ruling that would have upheld a (technical) software patent and created some kind of safe harbor for software patents. In Alice, the only safe harbor for software patents that the Supreme Court mentions is that "a computer-implemented process for curing rubber was patent eligible [...] [because it] "employed a 'well-known' mathematical equation [...] in a process designed tosolve a technological problem in 'conventional industry practice.'" That reference to Diamond v. Diehr, a 1981 decision, is not a safe harbor for software patents that are unrelated to manufacturing processes. There's a huge gap between Diamond v. Diehr and Alice v. CLS Bank, and as a result there is a need for a whole lot more line drawing, which I guess we will indeed see in the years ahead. For the sake of balance it would be helpful clarification if the Supreme Court could at some point affirm a technical software patent, such as an operating system patent. For now we just know what the Supreme Court considers a "generic computer implementation", but there's a need for more clarity as to what is not just generic.

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