Monday, May 2, 2016

Where will the 'friends of the Supreme Court' come down on design patent damages in Apple v. Samsung?

In March, the Supreme Court granted Samsung's petition for writ of certiorari with respect to design patent damages. Thankfully, the top U.S. court will interpret a statute that the Federal Circuit and Judge Koh in the Northern District of California believe allows an unapportioned disgorgement of infringer's profits regardless of how many other patented and non-patented elements a product may have--an approach that is not applied to any other intellectual property right. Meanwhile, both Apple and Samsung have been granted extensions for their filings. Samsung's opening brief is due on June 1. The amici curiae ("friends of the court") supporting will then have to file their briefs on or before June 8.

This will be the fourth round of friend-of-the-court submissions in connection with this extremely important issue:

  • In 2014, amicus briefs were filed ahead of the Federal Circuit opinion on Samsung's appeal of the Northern District of California ruling. Samsung's supporters included 27 law professors and industry group CCIA, which presented the theory that I believe is Samsung's best shot now. Apple received support from companies, with maybe one exception, could be described as no-tech and low-tech companies.

  • After the Federal Circuit sided with Apple last year, Samsung petitioned for a rehearing. Google, Facebook, HP and others filed an amicus brief in support of the petition for rehearing, in which they warned that a company could lose its entire profits over a single patented icon design. CCIA also supported the petition.

  • The Federal Circuit denied the petition, and Samsung went on to petition the Supreme Court. Earlier this year, its petition received broadbased support from industry as well as non-governmental organizations and academia. The issue was certworthy enough on its own but those amicus briefs probably made it particularly easy for the Supreme Court to identify this as a case to take on. There were no amicus briefs against the petition, but that, in all fairness, doesn't mean much: it's generally considered counterproductive to express an interest in the denial of a petition since it may serve to further raise the profile of the matter. I'm sure Apple didn't encourage anyone to file.

When the fourth round of amicus briefs (firstly the ones in support of Samsung's position, then Apple's backers) come in, it would be very surprising if Apple got more support, in qualitative or in quantitative terms, than Samsung on this issue. The economy at large and society at large stand to lose from overcompensation of design patent holders. But Apple, with its vast resources, is now probably making quite an effort to drum up support, and that effort will yield some results.

There are four main categories of stakeholders among the potential amici curiae in this case:

  1. Tech companies: In the past, Apple had virtually no support from that group of stakeholders, and Samsung had plenty. Technology businesses typically don't want their engineering efforts to be undervalued (but that is what an unapportioned disgorgement of infringer's profits would do). Samsung appears to hold more U.S. design patents than any other company, and Samsung itself is now fighting for apportionment. So far, the only tech company (besides Apple) that I've seen enforce a design patent is Microsoft (in its patent spat with Corel), and Microsoft may consider iOS the "lesser evil" among competing operating systems than Android. Then, Microsoft has actually advocated reasonableness in patent remedies (and balanced procedural rules) in a number of cases over the last 10 years, and I'm sure Microsoft wouldn't want to be liable for a disgorgement of infringer's profits if a single Windows icon was ever found to infringe someone else's design patent.

  2. No-tech and low-tech companies: Even product categories that are less multifunctional than smartphones and tablet computers typically embody more than just one patentable design. It is, therefore, hard to imagine that many companies from outside the high-tech sector would support Apple, but we'll see.

  3. Non-governmental organizations: public interest advocates routinely oppose overcompensation of right holders.

  4. The U.S. government: In a high-profile context like this, the administration usually expresses its views, but it doesn't have to (for example, it can also file something that fills a lot of pages without clearly taking anybody's side, or it could even elect not to file anything at all). It's one of the Solicitor General's tasks to represent the United States in court. The Solicitor General is a Department of Justice (DoJ) official, but the DoJ will likely consult with key government agencies such as the United States Patent and Trademark Office (USPTO) and the Department of Commerce on this matter. The USPTO never wants to discourage patentees from filing applications, but it also knows that economically devastating and blatantly unreasonable remedies ultimately hurt the patent system and could result in legislative action. The Department of Commerce has to think about implications for the economy at large, not just one company, albeit the #1 U.S. company by some criteria.

In about five weeks from now, we'll see how successful Samsung's mobilization efforts have been, and two months after that we'll see the fruits of Apple's campaigning.

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Thursday, April 14, 2016

Oracle fundamentally disagrees with Judge Alsup on how to instruct jury on fair use in Google case

On a recent occasion, Judge Alsup has correctly stated what the Federal Circuit ruled to be copyright-protected in this case (unlike in an order earlier in the build-up to the May retrial). But when I read his draft jury instructions on fair use for the upcoming Android-Java copyright retrial, I couldn't believe my eyes because he basically portrayed the "fair use" determination as if copyright was anti-innovative and "fair use" was the way and the light. I'm now even more of a Judge Alsup skeptic than before, and depending on how this case continues, "skeptic" may soon be a gross understatement.

Oracle has just filed a document that makes it very clear that it deems those "fair use" jury instructions to be fundamentally flawed (to put it diplomatically) and between the lines it indicates that Judge Alsup only has two choices: he can either rephrase his instructions so as to be consistent with the Federal Circuit opinion (and mandate) or he can have another appeal, with a high likelihood of him ending up being the loser of the appeal once again. And if another one of his key decisions had to be overruled in this case, it could become a major embarrassment.

When judges ask for "critique" of a draft jury instruction, they expect and get extremely respectful responses. Oracle's response in this case is not disrespectful, but it voices such a fundamental disagreement with the judge that it's clear there's no love lost between them (this post continues below the document):

16-04-14 Oracle Response Re. Fair Use by Florian Mueller

I'm now just going to quote, and comment on, some passages of Oracle's filing that show just how much the Java copyright holder disagrees with the judge:

  • "The Court's instructions do not accurately and evenhandedly state the law on fair use."

    COMMENT: I don't want to read too much into that, still I can't help but interpret "not ... evenhandedly" as a way of saying "Your Honor, you want Google to get away with what it's done and short of saying so, you couldn't have made it any more obvious than with those proposed jury instructions."

  • "Taken as a whole, the effect of the Court's proposed instructions would be to eliminate the exclusive right to prepare derivative works (or to authorize others to do so)."

    COMMENT: Just like Judge Alsup's non-copyrightability ruling threatened to "vitiate" (that term showed up in the amicus brief of a former U.S. copyright chief) software copyright, Oracle now claims that Judge Alsup's misportrayal of "fair use" law would effectively mean that anyone who creates a derivative work is highly likely to benefit from the fair use exception. Oracle's lawyers' use of "to eliminate" is typical hyperbole and I wouldn't go that far. It's not like those jury instructions would make it absolutely impossible or even highly unlikely for Oracle to prevail in a jury trial, but Oracle would indeed face an uphill battle in a situation in which, also in light of the Federal Circuit opinion, it should normally be on the winning track.

  • "If the instructions are given in the proposed form, they would violate the Federal Circuit's mandate and constitute reversible error."

    COMMENT: This announcement of an appeal sounds so strong that I wouldn't even be surprised if Oracle tried to avoid a jury trial based on unacceptable jury instructions and take this to the appeals court as soon as possible. If I were in Oracle's shoes, I would certainly see no point in going into a second trial where the court's jury instructions on "fair use" are a huge issue. Maybe Judge Alsup thinks that this may up the pressure on Oracle to settle but that won't happen. It just won't happen unless Google makes Oracle an offer that is too good to refuse. What's going to happen is that Oracle will, if necessary, litigate for a few more years, or even many more years.

  • "The [introductory] instruction is too narrow and one-sided in favor of Google in characterizing copyright as protecting against 'plagiarism' and fair use as progress ('development of new ideas that build on earlier ones'). "

    COMMENT: Here, Oracle comments on the most outrageous part of various problematic parts of the proposed jury instructions. You may wonder why I haven't published Judge Alsup's proposed instructions but that's because I don't think anyone would do the world a favor by publishing them: potential confusion of whomever may read them clearly outweighs any potential benefits.

  • "The Court's statement of the 'policy' of fair use [...] is not accurate, contravenes the legislative history, and is unsupported. Copyright protection (not just fair use) 'promotes' progress."

    COMMENT: How can you critize a judge any more harshly than by saying (more diplomatically than how I'm now going to paraphrase it) that he's wrong on the law (this reminds me of a Federal Circuit judge wondering about just how much Judge Alsup got confused last time around), he's disrespecting lawmakers, and he's writing up things that are baseless?

  • "The instruction on commercial use should direct a finding in Oracle's favor that Google's use is 'purely' or 'entirely' commercial. The Federal Circuit found that Google copied 'for what were purely commercial purposes.' [...] Counsel for Google admitted at oral argument that Google's purpose was 'entirely commercial.'"

    COMMENT: I expected Oracle to demand that the jury instructions, beyond merely stating the law and the Federal Circuit decision on copyrightability, contain some clear findings. It's one of the (many) things I missed when I read those draft instructions.

  • "The Court's proposed definition of transformative use is incorrect. It is inaccurate to instruct that '[a] new use is transformative if it is productive ….'"

    COMMENT: In my observation Judge Alsup's draft instructions describe "fair use" in a way that would make the "fair use" exception almost seem to be a rule on an equal footing with copyright itself as far as software is concerned.

  • "It is also incorrect and confusing to refer to transformative use as any use 'adding value.' [...] It is not about 'added value.' A 'distinct' purpose is critical."

    COMMENT: Oracle is right on this one: just think of a case like Campbell, where a parody of a music song also changed the music style. The "distinct" purpose is a reasonably high hurdle, and Judge Alsup's proposed instructions make it appear a much lower one than it actually is.

  • "Additionally, 'little more than plagiarism' [...] is not the test for what is not transformative. Transformation requires 'real, substantial' modification of the original work [...]"

    COMMENT: I already disagreed at the time of the 2012 trial with how Judge Alsup described the concept of transformation to the jury, and things have only gotten worse since then...

  • "[R]eferences to SSO [...] must be accompanied by reference to the declaring code, otherwise the instruction misleadingly suggests that declaring code is not protected when the Federal Circuit 'conclude[d]' that both 'are entitled to copyright protection,' [...], and all agree Google copied the declaring code and the SSO."

    COMMENT: On this one, let me refer you once again to the posting I already linked to at the start of this post. The Federal Circuit indeed held both the declaring code and the SSO copyrightable, and Judge Alsup has on at least one recent occasion stated this correctly, so the jury instructions should also make it absolutely clear (as opposed to confusing jurors).

  • "[S]pecific reference to a 'computer program' as functional biases the instruction. Finally, as per the Federal Circuit's finding, the jury should beinstructed that 'it is undisputed here that the declaring code and the structure and organization of the API packages are both creative and original.'"

    COMMENT: As I wrote above, the proposed jury instructions suggest that software is always, no matter how creative or original, a second-class citizen in the realm of copyright law.

  • "It is incomplete to tell the jury it must 'decide how much weight to give each … factor[].” [...] 'The Supreme Court has said that this [fourth] factor 'is 'undoubtedly the single most important element of fair use.’'"

    COMMENT: The fourth factor is the effect of the infringement on the market for the infringed product (and authorized derivative products of the infringed product)

  • "Oracle respectfully notes that 5 pages are insufficient to raise all of its objections to these proposed instructions. Oracle hereby preserves all its objections, which include any deviations from Oracle's already proposed instructions, [...] and any additional objections by way of Oracle's proposed instructions and jury instruction briefing as per the Court's Standing Order."

    COMMENT: By contrast, Google only raised three pseudo-objections to the proposed instructions and had enough space to discuss each of them in excruciating detail.

It's disappointing that there is now a real risk of the retrial being made pointless. I have little hope that Judge Alsup will make major changes to his proposed instructions. I guess he'll do something, but I can't imagine that it would be anything but insufficient. And depending on how insufficient it is, the appeals court may get involved with this case again rather soon...

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Saturday, April 9, 2016

New Oracle filing might result in damages theory north of $10 billion in Google copyright case

Last month there was quite some talk on the Internet about Oracle seeking $9.3 billion in damages from Google in the famous Android-Java copyright case that will go to trial again in a month, with the bulk of that amount ($8.8 billion) being a claim for disgorgement of infringer's profits. Since the related documents are all heavily redacted, I'm far from sure that the disgorgement and reasonably royalty figures can be added up: those are more likely alternative theories. Either way, we're talking about roundabout $9 billion that Oracle wants. At those altitudes, a few hundred million dollars more or less don't matter.

Google naturally rejects Oracle's claim, but it has a problem: the court-appointed damages expert, Dr. Kearl, has come up with a very wide range that also includes Oracle's number as a plausible scenario. That's why Google brought a motion--without previously seeking permission from the court--to exclude Dr. Kearl's testimony from the trial. Judge Alsup, who usually appears to be very strict on case management matters, merely gave Google a slap on the wrist and allowed Google to break a couple of rules at the same time (limit of number of motions in limine, page limit) with that additional motion. In exchange, he also allowed Oracle to bring an additional motion in limine.

Oracle has just filed its response to Google's motion. It's not an opposition brief in all respects: Oracle had already opposed Dr. Kearl's renewed involvement with the case and would still like to see his testimony excluded. Oracle is being very consistent up to that point.

But what if Judge Alsup, whose decisions I've struggled to understand on more than one occasion (most recently, I was very surprised about how he dealt with Google's unauthorized motion) and the most important one of which (copyrightability) resulted in a disaster for him, still wants Dr. Kearl to testify? In that case, Oracle at least wants to prevent the "cherry-picking" it accuses Google of. Apparently, Dr. Kearl came up with three numbers, and Google would like to limit that testimony to a number that would amount to Oracle getting nothing.

In its opposition to such cherry-picking, Oracle first argues that a disgorgement analysis should not consider non-infringing alternatives ("NIAs"). Oracle may be right on the law, but as a matter of policy, I disagree with Oracle on this one. Anyway, here's the most interesting passage from Oracle's latest filing:

"Prof. Kearl's Oracle Number is consistent with Oracle's $8.8 billion, and is in fact much larger than Oracle's $8.8 billion if the Court excludes his improper use of NIAs. Presumably Rule 706 experts do not often offer a number larger than the Plaintiff intends to offer."

It would be unusual indeed, and it would be the result of the court agreeing with Oracle's legal position that non-infringing alternatives cannot be used to reduce a disgorgement figure.

I don't know what Oracle's lawyers believe to be the number resulting from Dr. Kearl's analysis if adjusted by means of removing NIAs, but I guess they wouldn't say "much larger" (emphasis in original) if we were talking about a 5% or 10% difference. A 5% or 10% difference would be "significantly" larger. Therefore, it is fairly possible that the proposed adjustment to Dr. Kearl's numbers would result in a claim well in excess of $10 billion.

Besides that information I wanted to share something else from Oracle's filing. Oracle refers to a 1985 Ninth Circuit decision, Frank Music Corp. v. MGM, Inc.. In that one, a disgorgement of profits from unauthorized performance of scene from a musical at the (old) MGM Grand was based on multiple revenue streams including increased hotel and casino revenues. While it turned out later that the MGM Grand was still doing well without continued infringement, evidence had been provided that the MGM Grand used shows such as the infringing one to bolster its hotel and gaming revenues. The Ninth Circuit wrote:

"Just because one element could be omitted and the show goes on does not prove that the element was not important in the first instance and did not contribute to establishing the show's initial popularity."

This has some important bearing on Oracle v. Google, where Google argues that it no longer needed the 37 Java API packages or that it could already have removed them in 2010. Oracle argues that "the causal connection here is far stronger, because the revenues Oracle seeks to recover were realized on the infringing work (Android), while the gaming and hotel revenues in Frank were earned separately from the infringing work (the show)."

Here's Oracle's filing:

16-04-08 Oracle Response to Google Motion to Strike Kearl Testimony by Florian Mueller

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Friday, April 1, 2016

Google joins the Fair Standards Alliance: discontinued the bad fight, now fighting the good fight

The following press release by the Brussels-based Fair Standards Alliance would have been nothing more than an April Fools' Day joke a few years ago (this post continues with commentary below the press release):

--- START OF PRESS RELEASE ---

Google Joins Fair Standards Alliance

Brussels, March 31st 2016 – The Fair Standards Alliance (FSA) announced today that Google has become its 19th member.

Launched in November 2015 and based in Europe, the Alliance seeks to promote the licensing of standards-essential patents (SEPs) on fair, reasonable and non-discriminatory (FRAND) terms.

"We are delighted in the vote of confidence that a company such as Google is showing in our growing coalition. FRAND licensing of SEPs is a critical part of ensuring that the innovation ecosystem for 5G and the Internet of Things (IoT) can flourish, and we relish the opportunity to work with Google to further our goals of fair and reasonable SEP licensing on a non-discriminatory basis," said Robert Pocknell, Chairman of the FSA.

Allen Lo, Deputy General Counsel for Patents at Google, said: "Google has joined the FSA to support the leadership that it has demonstrated in showing the way to a fair and principled result."

The FSA believes that the entire innovation ecosystem is threatened by unfair and unreasonable SEP licensing practices. Failure to honour the FRAND commitment that exists in most standardisation licensing creates barriers to market entry, threatens to stifle the full potential for economic growth across major industry sectors, and ultimately curbs consumer choice.

The FSA's member companies, who hold more than 160,000 patents and spend more than 32 billion euros per year on R&D and innovation, include: AirTies, BMW, Cisco, Dell, Fairphone, HP, Intel, ip.acess, Juniper Networks, Lenovo, Micromax, peiker acustic, Sierra Wireless, Telit, u-blox and Volkswagen.

--- END OF PRESS RELEASE ---

This is excellent news for the FRAND cause. Google's economic weight alone exceeds that of all the other FSA members, though they already had a pretty good membership base before. Moreover, I could imagine that this here increases the chances of other heavyweights--Apple and Samsung, I'm looking at you in particular--joining the same organization.

Google's decision to join the FSA comes about a year after it contributed 4G (LTE) patents to Via Licensing's pool, a move that I already credited to "the real Google--not the FRAND abuser." There is an unfortunate history of Google (through Motorola) having tried to gain undue leverage with SEPs, a fact for which a court ordered (and the Ninth Circuit affirmed) it owed Microsoft damages, and no one in the blogosphere fought Google (and Samsung) harder over that kind of behavior. I knew that it was all reactive: Google and Samsung didn't draw first blood (only Motorola did, but that was before anyone would even have imagined that Google would buy it). They just wanted patent peace and sought to protect Android. But the end doesn't always justify the means.

Two major players who have fought the good FRAND fight in court are not FSA members as we speak: Apple and Microsoft. I have consistently supported them and everyone else (also smaller players like India's Micromax) in this regard. I was, of course, disappointed when I saw Apple take positions on reasonable royalties in a non-SEP damages context (including the position it's still defending with regard to design patents) that are not just inconsistent but totally irreconcilable with some of the really good points it has made in connection with SEP royalty demands by others.

When Apple and Google/Motorola entered into a second-class settlement of their patent suits almost two years ago, they said they'd work together on certain aspects of patent policy. So maybe Google can persuade Apple that the FSA's efforts would benefit greatly from being supported by both of the world's most valuable companies.

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Wednesday, March 30, 2016

Disgorgement of infringer's profits in Apple v. Samsung and Oracle v. Google: apportionment is key

At times I wish I knew everything about the cases I follow that the litigators working on them know, but it's possible that at times they wish they had the liberty to be as consistent in their positions on policy as an independent blogger--more independent than ever since I started the blog--can afford to be.

There's an interesting parallel between Apple v. Samsung (meaning their first case, with respect to which the Supreme Court has granted certiorari) and the Oracle v. Google Android-Java copyright litigation: in both cases, most of the damages at issue are based on the theory of a disgorgement of infringer's profits, and at first sight, the amounts claimed by the right holders appear very high. There are even more similarities. For example, in both cases, the defendants are key Android players. But there are also some important factual differences, not limited to the fact that design patents and copyright are different types of intellectual property.

The Supreme Court will take a look (at a hearing most likely to take place in the fourth quarter) at the question of whether an unapportioned disgorgement of infringer's profits is justified when a highly multifunctional product potentially embodies a number of design patents and a far greater number of technological inventions, as well as innovative elements protected by copyright and trade secrets. As for Oracle v. Google it has now become known that Oracle's damages expert from the well-known IP valuation firm of Ocean Tomo has arrived at a total damages claim of $9.3 billion, consisting of actual damages (in terms of lost Java licensing revenues) of roughly half a billion dollars and $8.8 billion in "profits apportionted to infringed Java copyrights." James Niccolai of the IDG News Service uploaded to Scribd both the relevant excerpt from Oracle's damages report and a Google motion portraying Oracle's damages claim as (in different words) the craziest thing anybody ever asked for in a U.S. court.

The notion of a disgorgement of profits is inherently somewhat Draconian. It has a strong punitive element, besides being meant to serve as a major deterrent. But even legal systems in which there is no such thing as punitive damages, such as the German case law on patent damages, enable right holders to base claims on this concept.

In U.S. copyright law there appears to be no dispute that the infringer's profits to be disgorged cannot be unapportioned, while statutory law on U.S. design patents has been interpreted in different ways. In Apple v. Samsung, both the trial court and the appeals court said the law of the land was that there should be no apportionment, but I still have hopes that the Supreme Court will thread the needle and let reasonableness prevail over utter irrationality. Just for the sake of the argument, let's assume now that apportionment is warranted in both cases, and take things from there.

On the same basis, let's assume that the asserted intellectual property rights are valid and enforceable. In Oracle v. Google, there is no more doubt about it: the appeals court decided so, and the Supreme Court denied cert. In Apple v. Samsung, this assumption is actually exceedingly Apple-friendly given the state of affairs of the D'677 iPhone design patent.

A reasonable apportionment of infringer's profits relating to the visual appearance of a smartphone and the layout of one of numerous screens can't result in a huge amount of money. I have tremendous respect for great designers, but to put this into perspective, a tech product is still predominantly a tech product. In the fashion or furniture industries, I'm sure many companies have been acquired at high prices because the acquirer wanted to own their unique designs (and the brands those designs are associated with). But in this industry, I'm not aware of any case where a software company was bought because it has a nice screen layout or where a phone maker was acquired at a high price because it had great designs. Instead, Google bought Motorola Mobility a few years ago at a price of $12.5 billion to get control of its utility patent portfolio, including its standard-essential patents. Not because of its designs.

In the Android-Java case, the ultimate result must also be a reasonable apportionment, and at first sight, the $8.8 billion figure (just the disgorgement part, not the lost licensing revenues) is staggering. It exceeds what Oracle paid six years ago for Sun Microsystems ($7.4 billion, with an enterprise value component of $5.6 billion), which made Java but also owned a hardware business and MySQL, which clearly was a key part of the reason Oracle bought Sun.

But that comparison alone doesn't make the number unreasonable. It could very well be that Java's reasonable market value in 2010 (when Android already existed but wasn't the world's #1 operating system) was close to $2 billion but market developments have since made it several times more valuable. I'm not arguing that this is the case, but it's far from an illogical position to take.

It's instructive to look at the strategic situation Google faced when it developed Android. Google's management foresightfully understood that the mobile revolution was going to come and that platform owners could displace Google by creating their own search engines or doing deals with a Google rival such as Microsoft's Bing search division. In order for Android to get traction, Google knew it would need app developers (Google presumably realized this even before Steve Jobs did). Attracting app developers to a new operating system from a company that never made one before was going to be hard enough, but it was going to be downright impossible with a totally new API (application programming interface) no one would have been familiar with initially. Java was already very popular on mobile devices (a fact that Google's filings in the Oracle case generally fail to recognize). Then there were Apple, which had Objective C (Mac software developers already knew it) and wouldn't have considered for a tenth of a second to license it to Google (though Google is now free to adopt Swift on open-source terms), and Microsoft, which certainly wouldn't have been interested in strengthening a new platform at the expense of Windows (which, like Java, also existed on mobile devices before the iPhone and Android).

Java was the obvious choice for Google at the time. It was not just an obvious choice: there really was no viable alternative.

Instead of letting Oracle buy Sun, Google would have had every opportunity to outbid the Ellison company. Everybody in Silicon Vally knew about Sun's dire straits, and maybe Sun's executives or investment bankers even contacted Google when shopping Sun around. Sure, Sun was about more than Java. I actually would have liked Google to own MySQL and think it could have proved reasonably valuable to Google. Google wouldn't have liked the excess baggage of Sun's hardware business, but it could have just divested that part to someone else or even just closed it down. Excess baggage didn't prevent Google from doing the Motorola deal, and that kind of excess baggage even created potential conflicts with its device maker partners. So, in retrospective, Google should have bought Sun to keep Java and MySQL, should have somehow gotten rid of the hardware part, and then this whole Oracle v. Google litigation would never have happened. With the benefit of being wise after the fact, the Sun deal would also have made it unnecessary for Google to buy Motorola Mobility later: Sun had lots of patents that Google could have used to countersue the likes of Apple and Microsoft.

Google didn't do what it could have done, and now the price may be a lot higher. That's the way things work.

How high the price should be is, of course, another question. I'm not saying that a disgorgement of $8.8 billion is the right number: this is just the position Oracle's expert takes. What I do wholeheartedly believe is that this is by far and away the economically biggest copyright infringement case in the history of the world, and that even a $1 billion award would be far too small when considering the value Google has extracted from Java. From a perspective of market capitalization, it's possible that Alphabet (Google's corporate parent) would be worth less than half of what it is worth without Android (because its core business might have lost a lot of ground). Google pays Apple $1 billion a year for having its search engine on Apple's devices, and that price would be far higher if Apple were the only game in town (or the only one besides Windows).

Oracle's claim is very, very high, but it's not nearly as absurd as Google's lawyers' argument that the infringed program code amounts to a fraction of a percent of the entire Android code base. In the potato business, that kind of ratio would probably be meaningful. Here, it's more like arguing that the human heart only has a mass of 250 to 350 grams and then argue that its value is roughly that of 250 to 350 grams of sand or water.

Google took the essence of Java, built Android on that basis, and yes, a multi-billion dollar disgorgement would appear perfectly reasonable to me.

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Monday, March 21, 2016

Supreme Court grants Samsung's petition to review Apple's smartphone design patents case

The Supreme Court of the United States has just published a decision it had already made on Friday (March 18): Samsung's December 2015 petition for writ of certiorari (request for Supreme Court review) in Apple's design patents case has been GRANTED with respect to question 2 (damages). As a result, the Apple v. Samsung damages re-retrial scheduled to begin later this month in the Northern District of California is almost certainly going to be postponed indefinitely, as Apple is seeking unapportioned infringer's profits on all five products still at issue and won't be entitled to that if Samsung prevails in the top U.S. court.

A decision to hear the case is not a decision in any party's favor, but it is substantial headway for Samsung and comes less than a month after the Federal Circuit threw out Apple's entire second California case against Samsung, nixing a $120 million jury award and rendering an injunction decision irrelevant. Samsung's outside lawyers in those cases, from Quinn Emanuel, must be very happy.

Cert petitions are usually long shots. But in this case, I was optimistic from the get-go, and I actually prepared this post here before the scheduled publication of the decision because I believed strongly it was going to play out just this way. I was in great company with my bullish perspective on the petition, as two bloggers who are IP lawyers agreed.

It's not surprising that the damages question, which also ignited far more interest among "friends of the court," fared better than the claim construction question, though the latter one was interesting as well.

Samsung received unusually broadbased support for its petition, which definitely buttressed the electronics giant's claims that the issues in the case--damages (disgorgement of unapportioned infringer's profits) and claim construction (functional elements not to be considered in infringement and validity analysis)--are of concern to the high-tech industry and other parts of the economy, and not just to Samsung only because Apple has already collected half a billion dollars in damages on a questionable basis.

Last month, Samsung reinforced its petition with a reply brief that argued the law of the smartphone should not follow reflexively from the law of the spoon. The Supreme Court may or may not agree that Apple was entitled to unapportioned infringer's profits, and it won't evaluate whether Judge Koh should have instructed the jury on the exclusion of functional elements from its analysis of Apple's infringement and Samsung's invalidity claims. Previously, both Judge Koh and the Federal Circuit had agreed with Apple that the law was, in their opinion, so crystal clear on unapportioned disgorgement that there was no room for any other interpretation. Judge Koh and the Federal Circuit also agreed that there was no requirement to instruct the jury on claim construction the way Samsung proposed. Now, the highest court has agreed with Samsung that there is a need for clarification of how to apply a 19th-century law to 21st-century, multifunctional, high-technology products. That is already, in and of itself, a disagreement with the way Judge Koh and the Federal Circuit had dismissed Samsung's arguments.

Whether this will result in the decision Samsung is fighting for remains to be seen. Without a doubt, the justices will understand the absurdity of unapportioned disgorgement, let alone the theoretical possibility of multiple disgorgements if multiple patent holders each win an unapportioned disgorgement. (In a more conservative theory, the second one might no longer receive an unapportioned disgorgement, but every patent holder would get something and one or more might get an unapportioned disgorgement, which also means that more than a company's entire profits from a product would be wiped out.) Then it depends on statutory interpretation. There are ways such as a reasonable definition of "article of manufacture," in which Samsung can prevail. Apple will have to argue that there is no room for interpretation outside of its own position. Sometimes there are situations in which judges see that a law needs a revision to reflect technological (or, in other fields, societal) change, but believe only Congress has the authority to do something about it. That's the conclusion Apple wants the Supreme Court to reach here.

I'll be following the proceedings in detail, and I'll be talking about statutory interpretation as well as policy considerations in the months ahead. For now, I just want to highlight a very few aspects:

  • One reason Apple wanted to avoid this is because one of its iPhone design patents at issue in the case, the D'677 patent, has been held invalid by the Central Reexamination Division of the United States Patent and Trademark Office in an ongoing reexamination. Should this decision to be affirmed, then it will be harder and harder for Apple to collect the amount of damages originally awarded. It will take years until there is a final, non-appealable decision (presumably, Apple will exhaust all appeals unless it prevails before), but significant interim steps can also have an effect on the infringement proceedings.

  • There was no amicus curiae (friend of the court) who filed a letter oin support of Apple's position. Apple received limited support for its position on damages--nowhere near the level of Samsung's support, but some support--in 2014 before the Federal Circuit. Those amici presumably didn't file a letter this time around because it would have been counterproductive: it would only have shown that there is strong interest in this. Now, at the merits stage, they will become active again.

  • I'm sure Samsung can count on at least the support it received for its petition, and that was already very impressive. But it's possible that now, with the Supreme Court having decided to look at this, even more companies will openly take Samsung's side.

I'm very happy that the Supreme Court will now take a look at an interpretation of the law that would theoretically threaten even a company like Facebook (or little guys--for example, "indie" app developers) with the prospect of losing their entire profits over a single design patent infringement. I'm hopeful that something good will come out of this. And it wouldn't even bad for Apple. Once the shoe is on the other foot, Apple, the most profitable company in the history of this industry, will fight the notion of an unapportioned disgorgement as well. It's just hoping to somehow get leverage over Samsung with its design patents, now that its utility (technical) patents have practically failed to have any non-negligible effect.

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Wednesday, March 16, 2016

Supreme Court petition 15-777 (Samsung v. Apple) closely watched by IP lawyers, relisted for this Friday

Earlier this month (on Friday, March 4), the Supreme Court of the United States already had Samsung's December 2015 petition for writ of certiorari (request for Supreme Court review) in Apple's design patents case on its agenda. It's nothing unusual for a case to be relisted, and it happened in this case. There was no weekly conference last Friday, so this cert petition will be discussed this week, and we'll know the decision (unless there's another relisting) on Monday morning.

Samsung received unusually broadbased support for its petition, which definitely buttressed the electronics giant's claims that the issues in the case--damages (disgorgement of unapportioned infringer's profits) and claim construction (functional elements not to be considered in infringement and validity analysis)--are of concern to the high-tech industry and other parts of the economy, and not just to Samsung (Apple has already collected half a billion dollars in damages on a questionable basis).

Last month, Samsung reinforced its petition with a reply brief that argued the law of the smartphone should not follow reflexively from the law of the spoon.

It's always been clear that this petition raises some extremely important issues. Apple's lwayers obviously had to try to downplay its certworthiness, but independent observers who have commented on the petition have all deemed it interesting (at least the part on disgorgement of an infringer's entire, unapportioned profits).

The fact that Samsung's petition is certworthy has been confirmed by two recent posts on key IP blogs:

  • The SCOTUSblog's Relist Watch:

    "The big new relist this week is Samsung Electronics Co. v. Apple, 15-777, which we're guessing is being closely watched by the IP crowd."

    That's a verys safe guess. Not sure this can even be described as a guess.

  • Wegner's Writings on the Los Angeles Intellectual Property Law Association's (LAIPLA) blog:

    "The petition has a higher than usual chance for success."

In other Apple-Samsung news, patent analytics firm Lex Machina has published a new report that once again confirms Apple and Samsung are the top targets of patent troll lawsuits. Finally, I agree in principle with Vivek Wadhwa's recent opinion posted on the Crunch Network (Techcrunch). He believes Apple and Samsung should end their dispute, and notes that "patent litigation, such as what Apple resorted to, rarely does the world any good."

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