Tuesday, June 21, 2016

Airbus (the COMPANY, not a plane) hijacked by patent extremists, joined trolls' lobbying entity named IP Europe

With respect to standard-essential patent licensing, my preferred European voice of reason(ableness) is the Fair Standards Alliance, an organization Google recently joined and which I'd like to see Apple and Samsung team up with at some point. On the other end of the spectrum, there's a lobbying group named IP Europe. While I personally know and respect two of the individuals working for that one, I fundamentally disagree with its policy positions and object to its false claim of supporting "innovatives SMEs." IP Europe advances the cause of patent trolls and of businesses that failed in the mobile phone business for a lack of innovation and increasingly resort to patent licensing as a revenue source.

Looking at IP Europe's member list, it's generally easy to see why each of those organizations expects to gain something from overpatenting and from an overcompensation of patentees, with a couple of exceptions, however.

Orange (France Telecom) is a carrier. In the U.S., mobile carriers are usually on the reasonable side (and sometimes go too far even for my taste when making public-interest arguments in amicus curiae briefs). Does the former France Teleom plan to engage in patent trolling like its British counterpart? I don't know, but it was most likely a mistake that Orange joined IP Europe.

The other, better-known and even more surprising member is Airbus Group. The only explanation I have for Airbus's decision to join IP Europe is that an IP-incompetent senior management has allowed the patent professionals running Airbus's IP department to hijack the company in order to advance the interests of their profession rather than defend the interests of their current employer.

In the airplane business, Airbus only stands to lose from excessive patent royalties. In the defense and space businesses, patents won't protect Airbus either. In 2012, Elon Musk already explained why SpaceX (which in a few years of existence has already achieved technically more impressive feats than Airbus in its much longer history) generally doesn't file for patents.

I want my Munich area-based startup to be very innovative in its niche, but generally speaking, Europe has a huge innovation gap versus Silicon Valley. California has Elon Musk. Europe has Tom Enders. Tom who? Well, the CEO of Airbus studied politics, started his career in politics, and at a heavily-subsidized intergovernmental joint venture like Airbus, political connections are more important than anything else. Elon Musk, despite all of his amazing talents, would never get a top job at an organization like Airbus. Fortunately, he doesn't need it.

When the CEO of a company that should be technology-driven is absolutely not a technologist (but a political scientist/historian), it just takes a self-serving IP department to make the company sign up with a lobbying group like IP Europe, thereby teaming up with highly litigious patent assertion entities (PAEs)/non-practicing entities (NPEs).

One of IP Europe's key priorities--if not its number one priority--is to fight against the "smallest saleable unit" approach to FRAND license fees. Do the bureaucrats in charge of Airbus even know what that means for their business? Presumably they don't. What if someone made a Motorola-like patent royalty claim and demanded a percentage of the sales price of an entire Airbus plane over a few WiFi, video or whatever patents?

Do those decision-makers realize that the number of potentially patented "inventions" in an Airbus that third parties hold account for a vast majority of all patentable "inventions" in a modern airplane? It has been estimated that 250,000 patents are embodied in a smartphone. In practical terms, the digital entertainment and communications technology installed in today's planes is increasingly like that, and actually much bigger.

To many of you this may seem obvious, but let me explain this for the rest: there is no such thing as a software patent that guarantees stability and security. The reason: no matter what a patent may describe (with or without specificity), it can always be implemented in an unstable and insecure fashion.

Airbus has a software quality problem. Last year Airbus even admitted that a software configuration error caused the crash of a military transporter, and I vaguely remember a crash of a commercial Airbus plane many years ago that some experts attributed to a software issue. In terms of success factors in the airplane business, that is what Airbus should be focusing on. It has nothing to do with patents. Any code that is stable or unstable, secure or insecure, is protected by copyright (and trade secrets). Any configuration that is stable or unstable, secure or insecure, is a matter of quality assurance.

If Airbus focused on software quality, it wouldn't have to fear copycats. If someone copied great code, copyright (not patent) law would protect Airbus.

Airbus is the craziest example now of a company that builds highly multifunctional products and opposes the "smallest saleable unit" approach to patent license fees. But maybe Airbus is not really a company. It's more of an intergovernmental organization that is detached from economic realities because taxpayers will have to foot the bill if anything goes wrong.

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Sunday, June 12, 2016

Amicus curiae briefs in Samsung v. Apple (design patent damages): all the documents and the key points

There never was any doubt that the question of whether the infringement of a single design patent by a complex, multifunctional product warrants an unapportioned disgorgement of profits would be an extraordinarily important one. Previous rounds of amicus curiae briefs already demonstrated broadbased support. But the level of support the petition has just received at this decisive stage exceeds my expectations.

One major caveat is that Apple might still be able to orchestrate something big as well. I doubt it for two reasons, though. First, the interpretation of the law that Apple is defending in this case is not really in the interest of a lot of companies. I wholeheartedly believe that Apple itself, if it weren't the beneficiary of an outsized damages award in this particular case, would be the most logical amicus curiae supporting Samsung in this context. Second, some potential Apple allies have now declared themselves in support of neither party, stopping short of supporting Apple's position in its entirety. Some companies just want to ensure the Supreme Court won't weaken design patents too much, but they don't say the law of the smartphone should follow from the law of the spoon. And the U.S. government's position is like "we disagree with Apple on the law and on policy, but we don't want to rule out that Samsung might still somehow become the last victim of an incorrect interpretation." That's a major win for Samsung and everyone with a balanced position on the issue.

I'll now point to all of the amicus briefs filed in the first round (I'll do the same when Apple's backers file later this summer) and sum up what I consider to be their key points.

Pro-Samsung brief #1: The Internet Association, The Software & Information Industry Association, Dell, eBay, Facebook, Garmin, Google, HP, Lenovo, Motorola Mobility, Newegg, Pegasystems, Red Hat, SAS Institute, Varian Medical Systems, Vizio

20 years ago I served (for only a short time because I then founded my first startup, which I later sold to Telefónica) on the board of the Software Publishers Association (SPA) Europe. The SPA merged with another body to form the Software & Information Industries Association, which now has more than 700 members, and Ken Wasch is still its president. He's done so much for the software industry over the decades. You can find the SIIA's press release on the amicus brief here, and the amicus curiae brief here.

The brief accurately mentions "the spurious quality of many design patents." This blog hasn't talked about all the ridiculously obvious designs for which the USPTO has granted patents. Even the USPTO now regrets having originally issued Apple's D'677 patent, which covers little more than a round button. Microsoft's tiny-arrow-in-a-corner patent is no better. And that slider design patent is probably not far below the quality of the average design patent.

The brief talks about how design patents have become weaker and weaker over the centuries:

"Whatever the degree of invention in Apple's design, this example amply illustrates that even design patents belonging to major technology companies may involve only minimal, if any, advances over the prior art. Design patents in the modern era are seldom directed to fashionable carpet designs or classic Coca-Cola bottles; they are often sought, and issued, for relatively mundane design features."

On the importance of technical innovation relative to design, I like the following passage from the brief:

"To state the obvious, the investment in research and development for information and communication technologies—currently estimated at $250 billion annually—extends well beyond design to include the hardware, software, and services that are incorporated into the technological products. [...] The reason is simple: technology companies know that consumers want a product that works well, not simply one that looks good."

That's true. For example, the nice design of my iPhone 6S (now my primary phone so I can always test the latest beta version of my app) doesn't help me as much as the shortcomings of Apple's on-screen keyboard and autocomplete algorithms affect me. I use two languages, sometimes in the same message, and always have to switch between keyboards in order to get the right dictionary. And even with the right dictionary, the iPhone's autocomplete won't find the word I want to type if I mistype the first character. None of that is an issue for Android, with or without the right to build devices with round buttons, rounded corners etc.

As for statutory interpretation, I already discussed the term "article of manufacture" in a post shortly before Samsung's opening brief. The Internet Association, SIIA et al. brief contains an interesting explanation of how "article of manufacture" must be interpreted differently from a "machine." A smartphone as a whole would, of course, be a machine.

Being familiar with patent licensing and litigation tactics of always singling out the most lucrative target, I also wish to quote the following passage:

"Finally, the Federal Circuit's interpretation could lead to arbitrary results. That is because it could make the measure of damages in design-patent cases depend on the identity of the infringer. Consider, for example, the market for smartphone components. [...] If Samsung or Apple were to infringe a component manufacturer's design patent and to incorporate it in a smartphone, the component manufacturer could recover profit from sales of the entire smartphone. But if the component manufacturer were to infringe an identical patent held by Samsung or Apple, Samsung or Apple could recover damages based only the manufacturer's sales of the component. In other words, an identical act of infringement would yield two different damages awards simply because the infringers packaged their products in different units."

Pro-Samsung #2: Computer & Communications Industry Association

I have a huge problem with the CCIA's positions on software copyright, but I will always credit the organization (of which Samsung is a member) for its pioneering role in placing the emphasis on how to interpret the term "article of manufacture" in an amicus brief filed with the Federal Circuit two years ago.

The organization's new amicus brief is consistent with previous filings. One subject it discusses in more detail than most other briefs is the problem of patent assertion entities (PAEs).

Pro-Samsung #3: Engine Advocacy

Engine is a startup advocacy organization. Its list of members is really impressive, including lots of Internet household names. I've uploaded its amicus curiae brief to Scribd. In filing this letter, Engine was joined by a 3D printing startup. 3D printing is definitely an area in which excessive design patent damages could have a devastating effect.

The brief does a very good job of looking at the problem from a startup angle. It's worth noting that a Stanford Law School clinic is representing Engine here.

It's disappointing and inexplicable that no major app developer organization filed a brief. But Engine raises pretty much the same issues as app developers face.

Pro-Samsung #4: Hispanic Leadership Fund, National Black Chamber of Commerce, National Grange (rural communities)

Minority advocacy groups Hispanic Leadership Fund and National Black Chamber of Commerce once again teamed up with the National Grange of the Order of the Patrons of Husbandry (advocacy group representing America's farmers and rural communities) to voice their specific concerns over outsized design patent damages. I've also uploaded their joint amicus brief, which contains an interesting reference to historic "design patent sharks" (the predecessors of today's trolls) while pointing out that patent-abusing competitors are the worst threat:

"Indeed, this is not the first time that design patents have spawned abuse. In the late 1860s, the Patent Office experimented with allowing 'design' patents to be issued for minor functional improvements on already existing products. [...] This ill-considered effort spawned the creation of 'design patent sharks,' who took out 'design' patents on basic farm machinery like plows, shovels, and other basic farm tools, and then sued unsuspecting farmers for using the protected technology. Cases like Nordock illustrate that an overly expansive interpretation of the recovery available under Section 289 could lead to a resurgence in this patent-enabled chicanery, by allowing excessive damages to be extracted on the basis of the 'design' of what is, in essence, a purely functional article. There is thus no shortage of abusers that will exploit the availability of entire-profit damages under Section 289. Although larger companies like Apple may be unconcerned about fostering a market for such abusive conduct, because they have the resources to fend off, or buy off, even the most abusive non-practicing entities, these abusers can be expected to exact a heavy toll upon smaller, entrepreneurial companies that lack the means to effectively defend against them.

Moreover, non-practicing entities are only part of the problem. Indeed, the outsized risks associated with entire-profit awards could be even more harmful when asserted in disputes between product-producing competitors."

As for the consumer argument that certain citizens depend on affordable smartphones to a greater extent than others, and that minority businesses on average have a disadvantage in terms of resources to fend off threats, the brief provides statistical facts that lend those claims significant credibility--even in my eyes, though I'm not easily persuaded by minority arguments (for example, I think Apple simply doesn't need a minority quota for its Board of Directors, and if affirmative action ever made sense, I believe we're way past the point where it did).

Pro-Samsung #5: Electronic Frontier Foundation, Public Knowledge, R Street Institute, American Antitrust Institute, IP Justice

The EFF is far too anti-copyright for my taste, and I find its positions on Oracle v. Google misleading and troubling beyond belief. However, its patent policy positions aren't nearly as radical as its views on copyright. On patent policy, the EFF is fairly balanced and reasonable. With respect to design patent damages it has partnered with some other advocacy groups. The EFF's press release can be found here, and it contains a link to the brief.

The EFF habitually bashes the Federal Circuit. Here, however, it does have a point that a patent marketing decision gave rise to a cottage industry of trolls:

"The case thus described was Forest Group, Inc. v. Bon Tool Co. and related to patent marking, but it could be the present design patent damages case in five years' time if history is any guide."

Pro-Samsung #6: Software Freedom Law Center

Despite strong reservations concerning the Software Freedom Law Center, I have uploaded its brief, which uniquely raises a free-speech issue in connection with design patents. I'd be extremely surprised if this argument got traction with the Supreme Court.

Pro-Samsung #7: 50 intellectual Property professors

The list of intellectual property professors supporting Samsung has grown over time: now there are 50 academics who signed the latest brief, including a number of very well-known ones. This is a very persuasive passage (and just an example; there's more of that in the brief):

"Nor does all, or even most, of the value of a product normally come from patented designs. People don't buy iPhones for their appearance alone; they buy them for their functions. Those functions contribute substantially to the phone's value and they are covered by many utility patents.

Indeed, by one estimate, there are 250,000 patents that arguably cover various aspects of a smartphone. To conclude that one design patent drives the purchase of the product, and therefore that the defendant's entire profit is attributable to infringing that patent, is to say that none of those functional features contribute anything to the value of the phone – a ludicrous proposition."

Neutral #1: Bar of the City of New York

The New York City bar association filed a brief in support of neither party. It raises two distinct issues. The first part is just about generating more business for lawyers even if it's against the public interest; they want Section 289 (disgorgement) to be deemed an additional, not alternative remedy to Section 284. The second issue is, of course, also just in the interest of lawyers: they argue that "a design patent holder's monetary recovery under section 289 should be on a sliding scale from $250 up to the extent of the infringer's profits, with the precise value being determined based on the facts of each particular case."

While the motivation is very transparent here (just more business for trial lawyers and for lawyers writing and responding to demand letters), the fact that these New York lawyers think the statute leaves room for different interpretations benefits Samsung.

Neutral #2: BSA | The Software Alliance

The organization formerly known as the Business Software Alliance (originally created by Microsoft, which is currently trying to get leverage out of design patents of questionable quality). I've uploaded its brief, which is vague and weak.

It doesn't address Apple's smartphone case patents (two of the three design patents at issue in the case) and focuses on screen design patents (which one of the patents-in-suit is):

"Design patents provide an essential element of legal protection for software innovations. This Court should ensure that design patents in the software context receive appropriate protection against infringement."

This is like saying "please don't take an extreme position on screen design patents" without clearly advocating affirmance or any particular rule or policy.

One reason (and not the only one) why the Supreme Court shouldn't take that filing seriously is that it's rather unclear to what extent the BSA's members even back that filing. It may just be the lowest common denominator, but it's probably even less than that. Dell and SAS Institute support the Internet Association/SIIA/Google brief. Salesforce and Intuit are not only BSA but also Internet Association members.

Neutral #3: Nike

Nike would have been a first-rate ally for Apple, and the fact it has declared itself neutral with respect to screen design and smartphone case patents is a huge lost opportunity for Cupertino:

"As the owner of more than two thousand active design patents, Nike holds the third largest portfolio of design patents in the United States."

Nike's brief focuses entirely on the relevance of design patents to its business:

"In consumer product markets and in fashion industries, including the highly competitive market for athletic footwear and apparel, product designs are often a key factor driving sales. Consumers largely choose products with designs that appeal to them and reflect their aesthetic sensibilities, their personalities, and the image they wish to convey to those around them."

As to statutory interpretation, Nike appears close to Apple's position (it wants the "total profit" rule to remain in place):

"The reality of facing a´substantial, actual damages award is a deterrent to would-be intentional infringers, making it less likely that intellectual property owners like Nike (as well as law enforcement agencies) will need to expend significant resources addressing knockoff products. Conversely, if the Court were to water down the remedies provided under Section 289, it would embolden potential infringers to treat the risk of an infringement judgment as simply the price of doing business, and one that can be managed by advancing arguments as to the appropriate apportionment of costs."

You'd be hard-pressed to find a bigger supporter of the idea of deterrence than me. For example, I'm part of a small minority of Europeans supporting the death penalty and the "castle doctrine." But even I don't think the end of deterrence always justifies the means. Here, what Nike wants is for my industry to suffer so that Nike enjoy a maximum degree of leverage over infringers. Sorry, but this is not only a sports apparel world.

Here's a couple of particularly unconvincing passages:

"[Reversal of the Fed. Circuit] would also create, for the first time in more than a century, a host of difficult questions of first impression that courts would have to resolve without guidance from Section 289's text."

If that's what it takes for the law of the smartphone to be different from the law of the spoon, then that's just simply necessary. But Nike totally overstates the problem anyway. Courts have to deal with apportionment all the time, such as in connection with standard-essential patents.

"For design patents, the risk of innocent infringement is low."

The average Nike shoe is more intelligent than that sentence. Tiny arrows, round buttons, rounded corners etc. are examples of how ridiculously broad many design patents are, and when patents are overbroad, incidental infringement is more frequent than willful infringement. To Nike's credit, a different passage limits the rarely-innocent-infringement claim to its own industry:

"The scenario that Congress feared is particularly real in markets such as the footwear and apparel market, where products sell at a fast pace and in high volumes, where innocent infringers are rare, and where product lifecycles are short. In such markets, infringers can effectively divert innovators' profits by entering and exiting the market swiftly in hopes that innovators will not detect the infringement in time or find enforcement worth the cost."

Just one last misguided part (of many) of Nike's filing:

"The validity of issued design patents can be challenged in an administrative 'inter partes review' proceeding before the United States Patent and Trademark Office (35 U.S.C. § 311(a)), and in a 'post-grant review' proceeding within nine months after a design patent issues (id. § 321)."

Yeah, it just takes so many years that it doesn't help much if devastasting remedies are imposed in the meantime. Look at this Apple-Samsung case: the D'677 patent is a dead design patent walking, but Apple will exhaust all appeals.

Neutral #4: Department of Justice

The federal government of the United States, represented by the Solicitor General, agrees with Samsung that the Federal Circuit and Judge Koh got the law wrong, but leaves the door open to a finding that Samsung failed to present the evidence necessary to benefit from the correct interpretation. I've also uploaded the DoJ's brief.

The legal argument that the Justice Department supports is the one relating to the term "article of manufacture":

"Although Section 289 entitles the patent holder to recover the infringer's 'total profit' on the 'article of manufacture' to which the design was applied, that 'article of manufacture' will not always be the finished product that is sold in commerce. Rather, the relevant article will sometimes be a component of the ultimate item of sale. In such cases, the patentee is entitled only to the infringer's total profit for that component, not its total profit for the finished item."

"[T]he term 'article of manufacture' literally encompasses all manufactured objects—both complete products and components—and it has historically been understood to include both. When the product whose sale gives rise to in-fringement liability is made up of multiple components, the factfinder must determine whether the 'article of manufacture' to which the defendant has applied the patented design is the entire product as sold, or a component of that product."

"If the product contains other components that embody conceptually distinct innovations, it may be appropriate to conclude that a component is the relevant article."

The DoJ also warns against the practical consequences of affirmance:

"The Federal Circuit's contrary approach, under which the relevant 'article of manufacture' is invariably the entire product as sold, would result in grossly excessive and essentially arbitrary awards."

"From a potential defendant's perspective, the consequences of the Federal Circuit's rule could be draconian."

Nike won't like the following:

"To be sure, even in cases involving unitary (i.e., single-component) items of sale, Section 289's 'total profit' standard may sometimes produce awards that are disproportionate to the commercial significance of the patented design."

Presumably for political reasons, the DoJ didn't want to support Samsung all the way against the most profitable U.S. company:

"Although the district court's jury instructions equated the term 'article of manufacture' with the finished smartphones, it is unclear whether petitioners produced evidence supporting their assertions that components of the phones should be considered the relevant articles of manufacture."

I don't have access to the complete record of the case. As far as I've been able to monitor the proceedings from a distance, Samsung repeatedly argued in favor of apportionment, so I guess there's enough in the record. And let's not forget that Samsung argues Apple failed to present evidence in this regard.

Apple has achieved that the DoJ isn't against the notion of a one-time windfall profit for Apple, but has failed to persuade the DoJ that the legal standard Apple is defending here is in the interest of the U.S. economy at large.

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Tuesday, June 7, 2016

Design patent absurdity on display as Samsung points Supreme Court to Microsoft suit over tiny arrow

Last week I provided an overview of the key issues in Samsung v. Apple, Samsung's appeal to the Supreme Court of Apple's design patent damages win. Thanks to CNET, Samsung's opening brief has meanwhile been published (this post continues below the document):

Samsung opening brief in Apple case at US Supreme Court by CNET News

That opening brief is really very interesting. Recommended reading. I'll talk about the issues it raises and the points it makes over time. The next procedural step is for "friends of the court" supporting Samsung (or supporting neither party) to file their submissions tomorrow.

The first part of Samsung's opening brief that I wish to comment on underscores the need for a Supreme Court ruling that will, hopefully, restore sanity. Otherwise, a company might have to disgorge its total, unapportioned profits from the sale of a product only because it uses a tiny arrow like this one (this post continues below the image):

This is one of the patents Microsoft is presently asserting against Corel. Last summer I reported on Corel drawing first blood by suing Microsoft over a bunch of preview-related patents. A few months later, Microsoft retaliated with the assertion of six utility patents and four design patents. The Electronic Frontier Foundation named one of Microsoft's design patents-in-suit the "stupid patent of the month" of December 2015 because it merely covered the design of a slider. But that patent isn't nearly as bad as U.S. Design PAtent No. D550,237, which practically just covers a tiny arrow positioned in the lower right corner of a rectangle. If you look at the drawings, particularly this one, note that the dotted lines mark the parts that aren't claimed. What's really claimed is just a rectangle with another rectangle inside and that tiny graphical arrow in the bottom right corner.

If the EFF considered the slider patent the stupid patent of a given month, it might as well consider labeling the tiny-arrow-in-a-corner patent the stupid patent of the century.

This is not about Microsoft-bashing. It's all about a systemic problem.

If the world's largest software maker, with an annual R&D budget on the order of $10 billion, countersues a smaller software company and 40% of its assertions are design patents, one of which covers a tiny arrow in a corner, it's clear that the legal uncertainty currently surrounding design patent damages due to the decisions made in Apple v. Samsung by the Federal Circuit and the district court makes design patents disproportionately "valuable" since litigation is all about getting leverage.

As Samsung's lawyers put it in their opening brief, "the entire-profits rule for design-patent infringement makes the value of any single design patent, no matter how minor or trivial, greater than the value of all the utility patents in a smartphone or other technological device combined. The rule thus encourages companies to focus research and development on design patents rather than technologies. As one commentator [Prof. David Opderbeck, Seton Hall University] put it, ''the Federal Circuit's ruling could allow design patent law to swallow utility patent law, making the ornamental design more important than the underlying technology.'""

The following section of Samsung's brief discusses the "disastrous practical consequences" of the Federal Circuit ruling (if it was affirmed):

"The rule would create extreme asymmetry between design patents and utility patents, which are governed by ordinary rules of causation and proportionality. By making the most trivial design patent worth exponentially more than the most innovative utility patent, the rule would distort the patent system and harm innovation and competition. The rule would encourage companies to divert research and development from useful technologies to ornamental designs. It would encourage design-patent holders to litigate even weak infringement claims in a quest for outsized awards. And it would encourage non-practicing entities to use design patents as the next big thing for extracting holdup value from targeted businesses, with such extortionate demands posing especially grave threats to small businesses for whom a single design misstep could be an existential threat. Congress could not have intended any of these results."

Apple and Microsoft, two highly profitable technology companies, may see short-term value in design patents. They may hope that design patents just give them the leverage they need to obtain favorable settlements/license deals. But in the long run, nobody except for patent trolls and failed businesses will really want any of those disastrous things to happen.

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Tuesday, May 31, 2016

Filing deadline tomorrow: Samsung to make its case against total-profit disgorgement over design patent infringement

More than two months ago, the Supreme Court of the United States granted Samsung's petition for writ of certiorari (request for top-court review) regarding design patent damages, which was supported by Google, Facebook and other tech giants. Tomorrow, Samsung has to file its opening brief. At this level of proceeding the parties' positions, theories and arguments are largely known, but it will be very interesting to see what priorities they set, what case law they can find in support of their positions, and which amici curiae ("friends of the court") will support them.

In terms of potential impact on the economy, this case is about a lot more than the roughly $500 million (just for an order of magnitude) in play between the two parties. Based on Apple's position that a disgorgement of infringer's profits over a design patent shouldn't be apportioned, it would be theoretically possible that the owner of a design patent covering the shape of an icon or a screen layout could claim infringement by a single pre-installed iPhone app and sue Apple for (if the alleged infringement has been ongoing for many years) an amount like $100 billion. And under Apple's standard, the court would have to instruct the jury that the $100 billion amount is, at a minimum, the proper starting point. Yes, no company in the world potentially stands to lose nearly as much from affirmance as the very party that is pushing for it: Apple. That fact is no less an absurdity than an inflexible interpretation of the statute in question.

But in two respects, Apple has already won. No matter what the damages award will ultimately be, Apple's design patent enforcement, which began about five years ago, has presumably contributed to Samsung now making its products more distinguishable from Apple's products. It may also have influenced others. The second respect in which Apple has won is that the Supreme Court granted only one of the two parts of Samsung's petition, but that didn't come as a huge surprise since the part on design patent damages had way more momentum (also in terms of amicus briefs) than the part on claim construction. Theoretically, claim construction could have had a devastating impact on Apple's design patent case (because it could have resulted in findings of invalidity and/or non-infringement). But let's stay focused on what actually is before the Supreme Court now.

Unless Samsung's legal strategy surprisingly changes with tomorrow's filing, it's foreseeable that the key parts to analyze will be two meta-level arguments and two key terms in the relevant statute:

Background principles of causation and equity

If the Federal Circuit's interpretation of the statute was affirmed, design patent damages would be a total outlier in the context of remedies for intellectual property infringement. An unapportioned disgorgement of infringer's profits is not available for utility (i.e., technical) patent or copyright infringement, to name but two examples. And that is so because a strong causal nexus between an infringement and a related monetary award is really a cornerstone of U.S. intellectual property law (and even of tort law in general).

In its cert petition Samsung already told the Supreme Court that "Congress could not have intended design-patent damages, alone among all forms of intellectual-property remedies, to be exempt from ordinary principles of causation and proportionality."

Absurd results must be avoided

Samsung's cert petition mentioned the "absurd" result of an unapportioned disgorgement of infringer's profits several times, such as in the following passage:

"As noted, the Federal Circuit's contrary interpretation of Section 289 produces absurd and anomalous results. The Federal Circuit's holding would require awarding Apple all of Samsung's profits for sales of a smartphone containing any Apple design patent, even a trivial one. And under this holding, profits on an entire car--or even an eighteen-wheel tractor trailer--must be awarded based on an undetachable infringing cup holder."

Neither the Federal Circuit nor Judge Koh ever said that the result was not absurd. Those courts basically just said: "Whether it's absurd doesn't matter, it's the law of the land." Apple just tries to distinguish examples of absurd results (like the cup holder mentioned above) from its Samsung case, but it doesn't explain how absurd outcomes could be avoided if its proposed interpretation was affirmed.

At this stage I guess the question of lawmakers' intent is going to be very important. Samsung's cert petition already quoted from Congressional deliberations. In a dispute over statutory interpretation, it can tip the scales in favor of a common-sense interpretation if there is an indication that today's common sense and the common sense at the time the law was made are consistent. Apple's message is going to be: "Even if you philosophically agree with Samsung, you have to legislate from the bench to reverse the Federal Circuit." Samsung will then benefit from being able to say: "You would simply interpret the law the way Congress intended."

Lawmakers have always been aware of the potential use of their statements in statutory-interpretation disputes and sometimes make certain statements on the record with a view to this. In fact, Eva Lichtenberger, a Member of the European Parliament, told me in 2005 about a carefully-crafted statement she made in the final Legal Affairs Committee debate on software patents because it might help in the event of an ambiguous outcome.

Article of manufacture

Two years ago I agreed with the Computer & Communications Industry Association (CCIA), an industry body I don't always agree with, on the term "article of manufacture" being potentially key to a reasonable interpretation of 35 U.S.C. § 289, the design patents disgorgement paragraph. Here's the first sentence from that paragraph (emphasis added):

Whoever during the term of a patent for a design, without license of the owner, (1) applies the patented design, or any colorable imitation thereof, to any article of manufacture for the purpose of sale, or (2) sells or exposes for sale any article of manufacture to which such design or colorable imitation has been applied shall be liable to the owner to the extent of his total profit, but not less than $250, recoverable in any United States district court having jurisdiction of the parties.

Apple says, and the Federal Circuit and Judge Koh said, that the relevant "articles of manufacture" in this case were various Samsung phones. But the whole problem would go away if "article of manufacture" was interpreted more narrowly, given that two of the design patents in question relate to only the outer cases of smartphones.

This argument reminds me of the "smallest salable unit" argument in the FRAND (fair, reasonable and non-discriminatory) licensing context. Oddly, Apple and Samsung/Google were standing on just the other foot at the time. Samsung and Google's Motorola demanded percentages of the entire price of an iPhone, but Apple (and with respect to the Xbox, Windows and other products, Microsoft) disagreed. I was on Apple's side then, I'm on Samsung's side this time around, but that's because I'm consistent, which those guys aren't (large corporations just have too many disputes to be consistent).

In connection with standard-essential patents, Motorola demanded 2.25% of the "price of the end product" and specifically clarified that this meant "e.g., each Xbox 360 product, each PC/laptop, each smartphone, etc." as opposed to "component software (e.g., Xbox 360 system software, Windows 7 software, Windows Phone 7 software, etc.)." It was outrageous, but at least it was clear. If Motorola could have just said "article of manufacture" to send out the same message, it would have done so. But "article of manufacture" doesn't mean the maximum royalty base imaginable. It doesn't mean "end product from consumer point of view" or anything like that.

Profits made from the infringement

The second part of the statute also contains a term that can be interpreted in a certain way to achieve a reasonable result (emphasis added):

Nothing in this section shall prevent, lessen, or impeach any other remedy which an owner of an infringed patent has under the provisions of this title, but he shall not twice recover the profit made from the infringement.

While this is just the passage on double recovery, the highlighted term can nevertheless be understood to be a description of the recovery the first sentence allows. (How could it not be?)

A "profit made from [an] infringement" is a narrower definition than "profit indirectly related in part to an infringement." It also suggests that the question of causation cannot simply be kept out of the design patent damages analysis the way the Federal Circuit and Judge Koh did.

In summary, there are ways in which the Supreme Court can restore sanity if it wants to, and that's the case Samsung is going to have to make in its opening brief tomorrow, in its reply brief a few months later, and at the Supreme Court hearing in the fall or winter. Apple's first-rate lawyers are going to give Samsung a run for the money, of course.

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Thursday, May 26, 2016

Oracle v. Google: jury finds in favor of "fair use," as no reasonable, properly-instructed jury could have

Courtroom tweeters in San Francisco have just reported that the Oracle v. Google retrial jury has found in favor of Google, i.e., has determined that Android's use of the declaring code and structure, sequence and organization of 37 Java APIs is "fair use."

This is the outcome of a rigged (for emotional, not financial reasons) retrial. It's absolutely wrong. This here is a far cry from anything any appeals court ever deemed to constitute fair use.

At the outset of the trial, I had already predicted that the jury was more likely than not to find for Google. I said 55%-60%. That was based on the fact that pretrial decisions by Judge Alsup had already favored Google, and his jury instructions on the "fair use" rules were unbelievably unfair and biased. They made it sound like the hurdle for "fair use" was rather low, while it's actually just meant to be an EXCEPTION (and copyright protection is the norm).

Also, while Google was able to present all of the "evidence" and testimony that helped its defense, Oracle had been precluded from presenting the entirety of its willful-infringement evidence.

Presumably, Judge Alsup will deny Oracle's motion for judgment as a matter of law (JMOL), if his jury instructions are any indication. Then Oracle will appeal again. I predict Oracle is very likely to succeed once again on appeal.

Judge Alsup has already said he knows there will be appeals. Last time, Oracle's appeal didn't end well for him. What the circuit judges said at the appellate hearing was anything but flattering for him.

I almost forgot to mention, before going to bed (and I'll sleep well because all's well that ends well), that a jury verdict obviously has no precedential relevance of any kind. As I wrote before the trial even started: this trial wasn't going to resolve the question of unlicensed, incompatible API reimplementations either way. Several hours before the verdict I said on Twitter that trial courts are the WRONG forum to resolve overarching, big issues--and especially in this case.

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Sunday, May 22, 2016

Google's 'fair use' defense against Oracle is an insult to human intelligence: Android's use of Java APIs violates copyright

There's a whole lot of doomsday stories out there on the Internet about Oracle v. Google, the Android-Java copyright case. In reality, the ongoing trial, in which jury deliberations will begin shortly, is not going to provide clarification regarding incompatible, unlicensed reimplementations of application programming interfaces (APIs) either way.

Let me be clear about this: I believe in pluralism, and that's why people certainly have every right to campaign against intellectual property (IP) protection of the declaring code and structure, sequence and organization (SSO) of APIs. What I do take issue with is that the anti-API IP crowd consistently advocates a misguided approach. If they wanted to talk to lawmakers on Capitol Hill about copyright and APIs, that would be democratically legitimate. If they showed a case in which a major API owner abused its rights in an anticompetitive manner, I'd most probably support a call for compulsory licensing. But after that non-copyrightability idiocy that failed at the appeals court (and that the Supreme Court declined to buy), the anti-API IP movement now picks a second inappropriate vehicle: the "fair use" exception to copyright infringement.

I'm investing a lot in software development (you'll see the results later this year) and I will fight hard against anyone seeking to unreasonably weaken software IP for purely ideological reasons. App developers like me would suffer collateral damage if anti-API IP advocates got their way on the wrong basis. On the right basis, such as compulsory licensing, I wouldn't have a problem with it. But I'll continue to speak out against a carpet-bombing of software copyright that would render even the most creative program code unprotected. That's where I draw the line, and the longer this takes, the more people will likely agree with me.

I'm 100% independent from Oracle but 100% behind its motion (filed Tuesday) for judgment as a matter of law (JMOL) against Google's "fair use" claim. And after reading Google's opposition brief, filed last night, my support for Oracle's motion is undiminished and I may be even more determined now because Google's lawyers have filed something utterly absurd.

To all you dreamers out there: it's time to wake up and face the facts. And the law.

The only regard in which Google has a point is that Sun Microsystems' management, including one of the industry's worst CEOs ever, failed to make it consistently clear to Google that the way it incorporated the Java API headers into Android was against the law. And failed to enforce. That combination of inconsistencies and weakness, however, is still a far cry from Google having had a license or that Java was "fair game." In fact, even the very Google-friendly jury in the first (spring 2012) trial accurately concluded that Google didn't actually rely upon its conduct being permitted. The retrial jury would almost certainly arrive at the same conclusion, and Oracle has shown some strong evidence that proved Google believed it needed a license at least for the sake of legal certainty, but most of the willful-infringement evidence has been withheld from the current jury by an unfair, biased, partial judge an IP lawyer (and software developer) described as a "sore loser."

JMOL in Oracle's favor is more than warranted because no reasonable, unbiased jury could possibly side with Google on "fair use" in this case. Google bears the burden of proof, but its defense is incredibly weak. You can read this in excruciating detail in Oracle's JMOL motion, which I published a few days ago. What I'll do now is point out the key deficiencies of Google's "fair use" defense, factor by factor based on the four-factor test in 17 U.S.C. § 107.

1. "the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes"

There's no dispute about this being commercial. If Judge Alsup had followed the instructions from the appeals court more clearly, he wouldn't have stricken the adverb "purely" before the word "commercial".

The availability of (most but not even all of) Android on open-source terms changes nothing about this.

Commercial use doesn't automatically defeat a "fair use" defense, but it does up the ante for Google.

Commercial nature is one of several aspects of the purpose and character of the use. The one Google mostly stresses here (and no doubt it's going to be key on appeal) is whether its use was "transformative." And it's this area in which I find Google's argument most absurd. It provides a large part of the reason for the headline of this post calling Google's defense an insult to human intelligence.

The fact of the matter is that any given API header has the same meaning in Android as it had and continues to have in Java. There's no change of expression or meaning here whatosever. So Google is making a context-based argument: Android is a mobile operating system and it's open source. I'll say it bluntly what I think of this: transformative my ass!

First, Java was in use on a huge number of mobile devices (BlackBerry, Nokia, Samsung etc.) before Android. Some of those device makers have meanwhile adopted Android, and others have more or less gone out of business. But at the time Android was launched, no one needed Google to take Java to mobile phones, and even Eric Schmidt, Google's former CEO and now the executive chairman of its corporate parent (Alphabet), conceded that BlackBerry phones were smartphones.

Second, Java was already available on open-source terms (OpenJDK) at the time, but Google didn't want to have the so-called copyleft obligation of contributing derivative works back to the free and open-source software (FOSS) community. The open-source argument is furthermore ridiculous because Android is licensed on Apache terms, meaning that anyone can take that code and build closed-source, proprietary software.

2. "the nature of the copyrighted work"

Already at the time of the first trial, exceptional creativity in API design had been conceded. There's plenty of evidence for it in the current record, such as an admission by one of Google's own witnesses that API design is more of an art than a science.

The (flawed) jury instructions suggest that something functional (such as program code) gets weaker protection than something very creative. However, here we are talking about highly creative and expressive code.

This is also an aspect that could become a big topic on appeal because it threatens to vitiate all software copyright. I also think it's at least unbalanced to suggest weak protection of software in connection with the second factor without simultaneously clarifying in connection with the first factor that functional arguments for "transformative" use are generally weaker than creative arguments. The perfect "fair use" case involves, as § 107 says, "criticism, comment, news reporting, teaching (...), scholarship, or research." I also think that parody is at a level with that list. But if you take someone's program code and simply build another program, you don't criticize, ridicule, comment, report, teach or research anything. You just steal. Nothing more than that.

It's very rare that someone uses program code for the purpose of criticism/parody. One of the very few examples I know is only a few months old: the Trump programming language. I don't think it treats the candidate fairly, but that doesn't matter: this clearly is a humorous use of program code. Android, however, is just another program, not a parody, nor commentary.

3. "the amount and substantiality of the portion used in relation to the copyrighted work as a whole"

I don't blame programmers for misunderstanding this part, but I've also seen some inexcusable nonsense from at least one lawyer about this.

While there's a lot more implementing code in those Java APIs than declaring code (as in any computer program), this factor must be seen in light of the applicable case law. Taking the "heart" of a work is what Google has done here, but there's also plenty of case law that shows even a minor percentage of an overall work is often enough to defeat a "fair use" defense. For example, the Supreme Court held in its 1985 Harper & Row v. Nation Enterprises ruling that even just copying a Gerald Ford speech manuscript of 300 words taken from a biography was enough to constitute copyright infringement.

Here we're talking about 11,000 lines of code, more lines of code than NASA used to control the Apollo moon landing.

Oracle's JMOL motion provides additional examples from the case law.

4. "the effect of the use upon the potential market for or value of the copyrighted work"

Java may still be popular in some other areas, but Oracle has shown plenty of evidence of losing business from customers such as Samsung (which is now the biggest Android device maker). Now, Google (and potentially Judge Alsup) would like to make a distinction between Java ME and Java SE. The stolen code has been taken from Java SE; Java ME was the mobile edition. But the question of whether Java ME was a derivative work of Java SE or vice versa is ultimately not going to decide this case.

Key holdings in Google Books case

Last month, the Supeme Court declined to take a look at the "Google Books" case. Earlier on, the Second Circuit had ruled in favor of Google's related fair use defense, and as I explained at the time, the rationale actually supports Oracle's case against "fair use" in connection with Android. I'd like to just quote and briefly discuss two key passages from the Second Circuit's Google Books ruling:

  • "Google's division of the page into tiny snippets is designed to show the searcher just enough context surrounding the searched term to help her evaluate whether the book falls within the scope of her interest (without revealing so much as to threaten the author's copyright interests)"

    Note particularly the part in parentheses. Google Books basically provide a teaser that can generate book sales. But Android does not use only so little of Java that programmers would ultimately prefer the real thing.

  • "Snippet view thus adds importantly to the highly transformative purpose of identifying books of interest to the searcher. With respect to the first factor test, it favors a finding of fair use (unless the value of its transformative purpose is overcome by its providing text in a manner that offers a competing substitute for Plaintiffs' books [...])"

    Here, too, the part in parentheses is key. Android crossed the line because it did become a competing substitute for Java-based mobile platforms.

The body of evidence is far stronger now than in 2012

There was enough evidence on the table back in 2012 that I called Google's "fair use" defense a fairy tale. But now there is so much more evidence, especially but not only regarding market impact, that no jury should even have to deliberate. This is a no-brainer. It's unfair use. As unfair as it gets. It may require an appeals court, though, to arrive at the correct result.

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Wednesday, May 18, 2016

Oracle moves for judgment as a matter of law against Google's 'fair use' defense to Java copyright infringement

Oracle has just filed a JMOL (judgment as a matter of law) motion against Google's flimsy "fair use" defense in the Android-Java copyright infringement case. Oracle's lawyers argue (and I agree) that, after the close of Google's "fair use" case, no reasonable jury could conclude that the way Android hijacked Java constitutes "fair use".

I can't comment on it until much later today, but I did want to publish this important motion immediately. It's the key motion in case the jury (which did not get to see some of the most important evidence and may have been confused by some of the testimony presented) finds in Google's favor. In that case, Oracle will -- no doubt -- appeal and argue that denial of its JMOL motion constituted an abuse of discretion (which it would also be in my opinion). Here's the motion for now:

16-05-17 Oracle Motion for JMOL on 'Fair Use' by Florian Mueller

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