Thursday, March 5, 2015

U.S. appeals court unlikely to grant Apple an injunction against Samsung over three software patents

The five-year anniversary of Apple's patent enforcement efforts against Google's Android mobile operating system (on March 2, 2010, Apple sued HTC) went unnoticed because there was nothing to celebrate in Cupertino. Half a decade after Steve Jobs told his biographer he considered Android a "stolen product" and wanted to "right this wrong" by means of thermonuclear patent war, it's clear that this industry's greatest product visionary simply overestimated the impact that his company's patents would have. Other companies than Apple haven't been much more successful in recent years, to be fair. This is an industry-wide issue.

Yesterday, the United States Court of Appeals for the Federal Circuit held a hearing on Apple's appeal of Judge Koh's August 2014 denial of a permanent injunction against Samsung based on the spring 2014 trial in the second California litigation between these parties. It's the sole remaining case in which Apple is still trying to obtain injunctive relief against Android-based products anywhere in the world. In July, Apple dropped a cross-appeal that could have led (in theory) to an injunction against Samsung based on the first case (which had initially gone to trial in the summer of 2012).

After seeing various reports (such as this one on AppleInsider) that already suggested Apple faced a skeptical court, I've just listened to the official recording (MP3) and agree that affirmance of the denial is the most likely outcome.

On Apple's behalf, WilmerHale's Bill Lee argued, as he and his team already had in their appellate briefs, that this time around Apple was entitled to an injunction despite unfavorable results in prior proceedings, attempting to distinguish the present injunction push from previous ones on three bases:

  1. feature-based rather than product-based injunction

  2. availability of designarounds (at least at the end of a sunset period)

  3. reputational injury

In its responsive brief, filed in December 2014, Samsung said that no matter what Apple says, it still couldn't tie patented features to lost sales. But that's what the causal nexus requirement that was at the heart of previous Apple-Samsung injunction denials is all about.

A majority of the three-judge panel -- specifically, Chief Judge Prost and Circuit Judge Moore -- appears to be unimpressed with Apple's new twist. Mr. Lee tried hard to win them over, but at the end of the day they appear to feel that none of Apple's "new" arguments get Apple over the decisive hurdle of showing a causal nexus between the infringements identified by the jury (those findings are on appeal and at least a partial reversal is quite a possiblity) and the irreparable harm it claims to suffer. Apple would like its "new" arguments to have a bearing on all eBay factors, but the most critical one, irreparable harm to Apple, must be shown regardless of the scope of the injunction and regardless of the availability of designarounds at the end of a sunset period. A purely reputation-based argument (having to compete against one's own features) doesn't appear to have traction either. Samsung's counsel, Quinn Emanuel's Kathleen Sullivan, noted that neither Apple nor Samsung ever advertised the features in question.

Samsung's counsel also had to answer some questions that appeared reasonably tough, but the one that was posed most emphatically ("why are you fighting [Apple's injunction request if you say you don't infringe anyway]?") had absolutely nothing to do with Apple's need to establish a causal nexus.

Of the three judges, Circuit Judge Reyna appears (only relatively speaking) most sympathetic to Apple's appeal. He expressed great admiration for Apple's contribution to innovation in a 2013 ruling in an Apple v. Motorola case. However, the patent Judge Reyna described as an example of true innovation at the time related to much more fundamental technology than anything at issue between Apple and Samsung (at least the patent in that Motorola case might have been important if a more powerful claim had survived, which it should have in Judge Reyna's dissenting opinion).

This appeal is unlikely to give Apple strategic leverage. Also, I'd like to point you to this IPWatchDog post on why a recent Supreme Court ruling should (adversely) affect the design patent-related part of Apple's first Samsung case. The related Federal Circuit hearing took place three months ago, so a ruling could come down anytime. There's a third Apple-Samsung appeal pending before the Federal Circuit. In that one, Apple is trying to get a more favorable outcome than at last year's trial while Samsung (which could easily live with last year's result) is also trying to improve its position. Samsung will file its appellate brief any moment now (its counsel announced this at yesterday's hearing).

Is it really in Apple's interest to get appellate decisions in those cases? I don't think so. I have said before that Apple should rather settle before a decision (on design patents, for instance) comes down. Based on how yesterday's hearing went, I think a settlement makes even more sense for Apple. Every time it is denied an injunction, things get harder the next time. Apple should look past the Samsung dispute (as it has in all other jurisdictions than the United States) and focus on matters such as its royalties fight with Ericsson, where there's a key issue (the proper royalty base) that can have far more impact on Apple's bottom line over the next five years or more than the remaining issues it has to sort out with Samsung at this stage.

For now, Apple is doing extremely well despite Android's huge worldwide market share. Should this change, then it may have to try again to obtain injunctions. And then it may have a stronger case for irreparable harm than it has in the current climate.

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Thursday, February 19, 2015

European Patent Office staff asks a good question: How many patents does Europe need?

Since December, I've been following the labor and human rights conflict at the European Patent Office and the debate over judicial independence. I'm less concerned about particular people holding certain positions (TechRights' Dr. Roy Schestowitz covers those issues in detail) than fundamental, structural deficiencies that have allowed judicial independence at the EPO to wither. And when patent examiners warn that patent quality is in jeopardy, I tend to listen carefully.

The Staff Union of the European Patent Office (SUEPO) has announced another demonstration. It will take place in Munich next Wednesday. EPO staff will march to the British consulate (on January 24 they went to the Danish consulate) and hope to meet the British Consul-General in Munich. It makes sense that SUEPO talks to the national governments that are ultimately responsible for what's going on at the EPO. The British government has also just received a letter from the UK's Chartered Institute of Patent Attorneys (CIPA) that IPKat reported on. That's definitely an awareness-raiser.

Here's SUEPO's flyer announcing the next demonstration (this post continues below the document):

SUEPO Demo 15-02-25 by Florian Mueller

The parts of the flyer that particularly caught my interest are at the beginning and at the end. The question of how many patents Europe needs is a good starting point for the EPO reform discussion. In some contexts, less is more. SUEPO's concern is that EPO president Benoît Battistelli's emphasis on "efficiency" reflects a lack of focus on patent quality:

"According to staff, efficiency is not an aim by itself: it is subordinated to the Office's duty, as a public service, to examine patent applications thoroughly and to refuse any 'bad' patents that would otherwise be a nuisance, in particular for the many European small and medium-sized enterprises that cannot afford expensive litigation. Mr Battistelli's single-minded focus on 'efficiency' and cost cutting is not in the interest of Europe!"

What I don't know is whether there are areas (and in large organizations there often are some) in which costs could be reduced without any negative impact on examiners' ability to decline to grant "bad" patents. However, SUEPO's concern is understandable in light of an official document (minutes of May 2009 board meeting), cited at the end of the flyer shown above, which says that Mr. Battistelli as well as EPOrg Administrative Council chairman Jesper Kongstad shared the following philosophy:

"Priority on increased output should be the leading consideration."

To be fair, not everyone who calls for increased output is necessarily against quality. However, the leadership of a patent office should, as a matter of principle, always view patent quality as the number one priority, with efficiency being a close second if there are objective indications of inefficiencies and a distant second if benchmarking and other types of analysis suggest that any further efficiency gains would be limited or, if overreaching, come at the expense of patent quality.

I have the impression that the EPO staff is genuinely concerned about patent quality. It appears to me that these people really want to be able to do a good job (that they can be proud of), and their perspective on their job is that they have to serve the public interest by rejecting bad patent applications. I'm not saying that this is the only reason they oppose Mr. Battistelli's reform agenda, but at the very least it's a significant and credible part of the consideration, not just a pretext.

One of the structural problems (which in turn is the root cause of other structural deficiencies) is that the EPO basically mints money for national patent offices by putting out many patents, and only by granting (not by rejecting) applications -- otherwise there's no money to be made for national patent offices. In business terms, the EPO generates, by granting patents, income for national patent offices through local registration and renewal fees that are almost entirely a gross contribution to the bottom line. It's all too tempting for national government representatives to go for short-term income rather than the long-term policy interest in patent quality. Like all analogies, this one isn't perfect, but imagine a situation in which a body deciding on fishing quotas would be controlled by the industry that supplies ships and specialized devices to the fishing industry. The ones in charge would then want more, not less, fishing because it serves their interests. It's in the public interest, however, to avoid overfishing -- and in the long run, that's also in the interest of the suppliers controlling the agency.

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Wednesday, January 28, 2015

Industry body says Apple advocates rules that would give patent trolls access to injunctions

Recently the Federal Circuit scheduled the hearing on Apple's appeal of the denial of a permanent injunction against Samsung after last year's trial. The hearing will be held on March 4. From the outside it looks like one of the last steps before this dispute will be history.

Three weeks ago I wrote about Apple's opposition to an amicus curiae brief submitted by Google, SAP, Red Hat, Rackspace, and -- notably -- Samsung competitors LG and HTC. The brief was accepted by the Federal Circuit over Apple's objections. Apple may have opposed the filing just because this was an opportunity to highlight Google's special involvement with the case in an effort to diminish the brief's credibility, but even if one viewed Google (like Apple suggested) as a de facto party to the case, the other filers have quite some credibility.

Cases should be decided on the merits, not on amicus brief campaigns. That said, it says something that Apple has support only from Nokia and Ericsson -- the company with which Apple now has a dispute over potentially much more money than what the remaining parts of the Samsung case are about, especially since the Apple-Ericsson situation is very unbalanced (Apple has much less offer to Ericsson in terms of a patent license, so it won't be able to offset the inbound licensing cost with much of an outbound licensing revenue stream).

Besides the aforementioned group of companies, the Computer & Communications Industry Association (CCIA), whose members are listed here, also submitted a brief. It already did so back in mid-December, but it appeared on the Federal Circuit docket only yesterday. I've also found it (PDF document) in the Briefings & Filings section of CCIA's website.

It focuses on two issues. The first one is about whether a feature-specific injunction should be easier for Apple to obtain. CCIA argues that the scope of the injunction was already considered.

There's a second, shorter part that raises an issue I wish to highlight. CCIA says "the special treatment Apple requests would open the door to patent assertion entities [i.e., patent trolls] to demand injunctions."

CCIA takes issue with the notion that a patent holder shouldn't have to prove a causal nexus between the infringement of a small feature of a multifunctional device and the alleged irreparable harm because it's so easy to work around.

In light of strict page limits, it would be unfair to both Apple and CCIA not to consider an important nuance: while this particular part of Apple's pro-injunction argument could indeed open the floodgates to injunctions obtained by patent trolls (which could also hurt Apple in the future), I understand Apple's position as being about the combination of the availability of workarounds and the patent holder having a "reputation for innovation." The second part would be much harder (though not impossible) for a patent troll to satisfy.

CCIA nevertheless has a point. In order to obtain an injunction against Samsung (over patent claims that are too narrow to give Apple strategic leverage), Apple must try different things to lower the hurdle. Apple wants to have its cake and eat it (get an injunction against Samsung but preserve much of its ability to fend off injunction demands by trolls), and that's always risky. Presumably the perfect outcome from Apple's point of view wouldn't be that the court reverses Judge Koh's injunction denial just based on the availability-of-workarounds basis. Apple almost certainly hopes for the aforementioned combination of that one with the "reputation for innovation" criterion. However, this here could go wrong in two ways:

  1. An appellate decision that emphasizes the "small feature" part (or is based entirely on it) would have exactly the effect CCIA warns against, whether or not this would have been Apple's intention. Apple can make its case but it can't write the decision even if it prevails.

  2. I've previously criticized the "reputation for innovation" criterion as a very vague and soft one, and I think it runs counter to the traditional logic of the patent system, which is all about technological merits (what contribution was made to the state of the art relative to the prior art?). If this approach was adopted by the court, patent law would depart from its focus on rewarding inventiveness and start to reward PR and marketing. A patent troll (not a small one, obviously) could spend a lot of money promoting its inventions and its research and development efforts to maximize the leverage it gets from its patents. And if it has other licensees, those are arguably harmed by infringement, and by extension, the patent holder is then harmed as well.

Apple is doing so well. It doesn't really need an injunction (over patent claims of limited scope) other than for publicity and pride. In terms of natural allies for Apple when it comes to balanced patent policy, the likes of Google, Samsung and SAP -- companies that also have a strong reputation for innovation -- would clearly be a better fit (because their uncompromised priority is on making real products) than Nokia and Ericsson. It's possible that just the increased cost of licensing patents from Nokia and Ericsson in the future (those also have non-standard-essential patents, so FRAND alone can't solve the entire problem for Apple) will outweigh any positive effects that Apple could get, in the most optimistic scenario, from a successful appeal.

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Friday, January 23, 2015

Dear EPO Leadership: a judge subjected to an 'office ban' IS a suspended, temporarily-removed judge

It's time for a follow-up on what's going on at the European Patent Office. The day before yesterday, the EPO staff union, SUEPO, took to the streets of Munich again--this time around, approximately 1,000 EPO employees went to the Danish consulate (this post continues below the document):

15 01 22 SUEPO Flyer by Florian Mueller

The Danish consulate was chosen because a Danish public servant, Jesper Kongstad, is the chairman of the Administrative Council of the European Patent Organisation. I have heard from multiple sources that he's always aligned with controversial EPO president Benoît Battistelli.

The SUEPO flyer I published above contains some links, including one to this blog, and I recommend all of them. I wish to particularly highlight this article (PDF) by patent litigator Dr. Ingve Björn Stjerna that connects certain dots between the proceedings before the Court of Justice of the EU concerning the future Unified Patent Court and the questions that have been raised about judicial independence at the EPO. The related part (entitled "The most recent developments at the EPO") begins on page 3 of the document.

One of the links points to a TechRights article, and there are a couple of other recent TechRights article I find interesting (which does not mean a wholesale endorsement): this one on the rumor that the EPO's recently-hired Director of Internal Communications has "resigned" and this one on (so far unproven) allegations against a vice president of the EPO. The de facto suspension of a member of a board of appeal (i.e., an EPO-internal judge) that has drawn much criticism from judges and lawyers was, according to French financial daily Les Echos, due to whatever the suspended judge said about that vice president, Mr. Željko Topić.

You can find many interesting comments below this IPKat post on an EPO-internal memo with which a vice president, through one of his assistants, told the heads of examination units what he thought about a letter by retired UK judge and professor Sir Robin Jacob to the Administrative Council.

Here's my thinking: On the one hand, I can understand that the EPO leadership is increasingly nervous. I can also appreciate that they would prefer to handle matters like these internally and confidentially. But opacity has its limits, and the EPO is simply too important for people like Sir Robin (and so many others) to ignore what is going on there.

EPO vice president Minnoye is right that Sir Robin (and others, including me, except that I'm not aware of any EPO-internal communication about me) was "not aware of all facts" when he wrote his letter. But he had apparently received information from reliable sources according to which the suspended judge had not done anything that would explain why he had to be removed, why his computer had to be searched, and why he had to be denied access to the building. I'm sure Sir Robin would never have written the letter if there had been the slightest indication of, for example, the allegations having involved physical violence that others in the building had to be immediately protected from. Everything that the outside world has heard so far is about information and/or opinions the suspended judge shared.

That is enough for Sir Robin and others to conclude there was no basis for executive action. Whatever the issue may have been, it should have been properly investigated, and no matter how serious or not, this should have been adjudicated by a judicial body--not the president, not the Administrative Council--before taking such action.

The second point made by EPO VP Minnoye is that Sir Robin allegedly referred to a different type of executive action. Mr. Minnoye stresses this was an "office ban."

This is old news. It had already appeared in December that the EPO leadership distinguishes between

  • (temporary) office ban,

  • (temporary) suspension, and

  • (permanent) removal.

This sophistry is not going to get them anywhere. The critics of the decision presumably (and in my case, I know it's definitely the case) just refuse to make that distinction because it's meaningless to them.

Let's think about it. A judge who is not allowed to enter the building can't hold hearings, can't (easily) meet with his peers on the same board of appeals to discuss the case, can't access certain document databases, can't use office equipment there, can't get help from assistants. He's simply unable to do his job for all intents and purposes.

How is that not a suspension? How does an executive's ability to make this decision not compromise judicial independence?

I've been saying for some time that it would be a mistake to focus just on Mr. Battistelli. The problems here are structural. Mr. Minnoye may very well be right that in formal terms, Mr. Battistelli can impose an "office ban" on a judge, and that this is allowed by a section of the EPO's rules that is different from the one on a suspension, and that a suspension is not a removal because it's temporary (another distinction that amounts to hairsplitting). So maybe Mr. Battistelli acted in accordance with the rules, some of which he made or changed himself (and the Administrative Concil rubberstamped). It's not really important whether Mr. Battistelli will leave the EPO in a few months or in a few years. All that matters is that the structural deficiencies that allowed the current situation to arise be addressed for once and for all. The national governments of the EPO contracting states are responsible for this.

The root causes are key. Mr. Battistelli is not a root cause. There are reasons to believe that under this leadership the situation exacerbated, but he does not share political responsibility. Dozens of European countries that believe they have to "remind" China and Russia of human rights and democracy issues time and time again have allowed the situation to get out of hand because they failed to put proper checks and balances in place.

Mr. Minnoye and Sir Robin can be right at the same time. I tend to think they both are right at the same time. In Sir Robin's case I'm sure, in Mr. Minnoye's case I can see that the EPO's rules probably support his logic.

The bottom line is that reform is needed. The Administrative Council has been part of the problem, not part of the solution. Sir Robin and others were too polite to address someone other than the Administrative Council. They should have contacted politicial decision-makers and members of different parliaments. The Administrative Council appears to be the fox in charge of the henhouse, though it would be great if it could prove its critics wrong in the months and years ahead and bring about meaningful change, rather than endorse and rely on meaningless sophistry.

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Friday, January 16, 2015

Ericsson may demand 1.5% of Apple's sales from LTE-compatible iPhones and iPads for its patents

This is a follow-up to yesterday's post on the dispute between Apple and Ericsson over standard-essential patent royalties. I published Ericsson's complaint first because, though it was filed two days later, it appeared on a publicly-accessible court docket sooner. I also want to show you Apple's complaint now and say a few things about it (below the document):

15-01-12 Apple Complaint Against Ericsson by Florian Mueller

Apple's complaint was filed by Wilmer Hale, one of the firms representing Apple against Samsung. Wilmer Hale originally focused on Apple's defense against Samsung but also became involved with offensive matters, especially in the Federal Circuit (access to injunctive relief). Mark Selwyn has been a very key player on Apple's external legal team in the Samsung cases, in the U.S. as well as abroad (there was at least one Mannheim case in which he officially attended the trial). Joseph Mueller (not a relative of mine) is a co-author of a study according to which smartphone patent royalties may exceed $120 per device and undermine industry profitability. There's no reason to assume he's responsible for Apple's damages claim in the second California Samsung case (over five patents) that I criticized so harshly last year, or the design patent and trade dress damages in the first case.

It's the fate of lawyers and their firms that they stand on different sides of debates from time to time, and in this case it's not even inconsistent per se because Apple's position is that standard-essential patents have little value while non-SEPs should be deemed very valuable. While it's intellectually consistent, I disagree with the unbelievable discrepancy between Apple and WilmerHale's positions on SEP vs. non-SEP royalties. It's like they want non-SEPs on small features to be hundreds, if not thousands, of times more valuable than SEPs without which those devices wouldn't work at all. For example, in the first Samsung case Apple sought $2.5 billion (mostly over design patents) from Samsung while arguing that half a cent per Samsung SEP was a FRAND royalty. To WilmerHale's credit, the aforementioned study raises concerns over patent royalties that are not limited to SEPs.

Apple's complaint cites a former director of patents and licensing at Ericsson who publicly stated in 2010 that Ericsson expected to seek LTE royalties of 1.5% of the end product price. The filing also says the following:

"In its public statements, Ericsson has never retreated from the position that it is entitled to an approximate 25 percent share of a total LTE 'royalty stack' based on a percentage of the end prices of entire LTE devices--such as full smartphone or full tablet computers. And Ericsson has never accepted that LTE licensing should begin with a component-focused royalty base, to which a reasonable rate is applied."

Apple's complaint then picks seven LTE patents Ericsson asserted in other litigation and asks the court to hold those patents non-essential to LTE (in which case Apple wouldn't need to license them merely because it claims its products are LTE-compatible) or, should the court disagree on non-essentiality, to determine a FRAND rate for each of them. This patent-by-patent approach is unacceptable to Ericsson, which is why it asked the court in Texas to determine a portfolio rate.

The much more fundamental controversy here is not whether a FRAND determination should be made on a patent-by-patent basis but the question of the royalty base (see also the second sentence of the paragraph quoted above).

Ericsson basically takes the position that everything you run on an iPhone or iPad depends on wireless connectivity, so they should get a percentage of the device price. Apple's position has been for a long time that the price of a baseband chip is the proper royalty base against which some percentage should be applied, arguing that a "jalopy" and an expensive sports car also pay the same highway toll.

Obviously, access to injunctive relief has become much more difficult for SEP holders as a result of certain judicial decisions and regulatory interventions and settlements in recent years, at least in the U.S. and in Europe. But there were two key FRAND-related battles that the "net implementers" (my term for companies that are implementers of standards to a far greater extent than they seek to exploit SEPs of their own) haven't been able to win. The first one is about whether the exceptional cases in which injunctive relief is available should depend exclusively on the patent holder's behavior (since that's the party that made a FRAND pledge in the first place) or on both parties' conduct. The likes of Google (Motorola) succeeded in convincing judges and regulatory authorities that FRAND is a two-way street and an absolutely unwilling licensee may be enjoined from further infringement, as opposed to one that makes a good-faith, serious effort to obtain a license. There's no reason to believe that courts and regulators will change their stance on this one anytime soon. But the second question is the one Apple has now put front and center in its California case against Ericsson, and it's one on which the jury is still out though Apple does face a significant (or maybe even steep) challenge. The royalty base.

Even Judge Robart held in the Microsoft v. Motorola FRAND contract case that a royalty based on the price of a complete product as opposed to that of the smallest saleable unit (which Microsoft proposed in that case and which Apple is arguing now in the Ericsson case) may still be FRAND, as long as the percentage is low enough. However, in a different case (in Chicago), Judge Holderman agreed with a group of defendants against Innovatio's WiFi claims that the chipset price as the proper royalty base.

It won't be easy for Apple to get a bright-line rule that a FRAND commitment is violated merely by using a different royalty base. In procedural terms, I think Apple would have to take the Ericsson case all the way up to the Supreme Court--and while there are reasons to assume that Apple will drop this case as soon as it can reach a reasonable deal with Ericsson, the question is strategically important enough to Cupertino that it may pursue this as a matter of principle.

While I'm not aware of any ruling in which a U.S. or European court categorically ruled out injunctive relief over SEPs even against unwilling licensees, it looks like the law on the royalty base isn't settled yet, so this could be an increasingly interesting case over the next few years. The days are long gone when this was mostly a "FRAND Patents" blog, but I plan to look at this dispute from time to time.

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Thursday, January 15, 2015

Apple-Ericsson spat shows some big-dollar licensing issues remain to be resolved in smartphone industry

Apple and Ericsson teamed up with others (Microsoft, Sony, BlackBerry, EMC) in 2011 to buy up Nortel's wireless patent portfolio. As expected after a November motion, the Rockstar v. Android dispute has come to an end. Patent aggregator RPX Corporation, which is closer to Google than to Apple and Ericsson, bought Rockstar's patents in December.

But Apple and Ericsson now have licensing issues to sort out between the two of them. They had a five-year patent license in place, and it has now expired, according to an Ericsson press release. Traditionally, 'tis the season for patent suits resulting from failure to agree on renewals. Many patent license deals have terms defined by calendar years, and in recent years there have always been filings of this kind in early January.

Apple has won the race to the courthouse with a declaratory judgment action (asking the court to find that some Ericsson LTE patents are neither essential nor infringed) it filed on Monday in the Northern District of California. Two days later, Ericsson brought this very interesting FRAND-declaration complaint in the Eastern District of Texas (this post continues below the document):

15-01-14 Ericsson Complaint Against Apple by Florian Mueller

In the past, FRAND rate determinations were requested by implementers of standards (Microsoft/Motorola, Apple/Motorola, Huawei-ZTE/InterDigital). This is the first such case, at least the first high-profile case, in which the patent holder goes to a court and requests this kind of ruling.

It may be tactics, but Ericsson does exude confidence in the defensibility of its royalty demands by triggering the FRAND rate determination process instead of waiting for Apple to do it at some stage of a patent infringement proceeding.

What's much clearer is that we're going to see a venue fight, and Apple filed first, which means Ericsson is going to need some really strong arguments to avoid formal or factual consolidation of its FRAND declaration suit with the California case. The venue could make quite a difference here. Not only are the Northern California judges less patentee-friendly in my observation than their colleagues in East Texas but Silicon Valley juries are particularly likely to buy Apple's innovation story. I'm not based there but, frankly, I also look at Ericsson as one of those companies, like Nokia, that were way too bureaucratic, technocratic, and unimaginative to deliver a mobile computer and useful mobile Internet device to consumers over all those years, so the world really needed the iPhone revolution for the sake of progress.

Despite the fact that consumers the world over have far more reasons to thank Apple than to thank Ericsson, I want to be rational and Ericsson's innovation story is a pretty good one, too. It can legitimately claim that it still spends billions of dollars every year on research and development (it no longer builds mobile handsets, but is still big in infrastructure), and in its complaint it lists the following accomplishments, most of which go back such a long time that the related patents have expired:

  • "in 1878, Ericsson sold its first telephone;

  • in 1977, Ericsson introduced the world's first digital telephone exchange;

  • in 1981, Ericsson introduced its first mobile telephone system, NMT;

  • in 1991, Ericsson launched 2G phones on the world's first 2G network;

  • in 1994, Ericsson invented Bluetooth;

  • in 2001, Ericsson made the world's first 3G call for Vodafone in the UK; and

  • in 2009, Ericsson started the world's first 4G network and made the first 4G call."

Ericsson does deserve respect for all of that. Whether the license fees it wants Apple to pay are excessive may have to be determined in court. While a settlement between these companies is fairly likely to happen before a judicial decision, Ericsson, based on its behavior, may be the most demanding one of the major wireless patent holders and Apple has a lot at stake here financially just because of its huge revenues. So it really could be that pre-trial discovery and motion practice won't provide these parties with enough guidance, and one or more decisions may really be needed.

Paragraph 35 from Ericsson's complaint makes some general allegations about Apple's behavior and how it compares to that of its competitors:

"The parties' licensing negotiations have been unsuccessful because Apple refuses to pay a FRAND royalty corresponding to those paid by its competitors for Ericsson's Essential Patents. Apple fails to honor the fact that FRAND licensing is a two-way street, requiring not only that the licensor is fair and reasonable in providing licensing terms, but also that the licensee negotiates in good faith and accepts FRAND terms when they are offered."

Apple may be the most difficult company to sell a SEP license to, but it's a fact that Apple's competitors that have taken a license from Ericsson haven't always done so without a fight. Ericsson and Samsung settled only after failed renewal talks had resulted in litigation. Still, that deal helps Ericsson now. If any U.S. court (be it a judge or a jury; be it in California, Texas, Washington DC or elsewhere) determined that held that Apple should pay lower royalties (relative to volume) to Ericsson than Samsung, the protectionism question would inevitably come up. It would look like the United States allows Apple to get away with an unusual unwillingness to license SEPs.

Ericsson tends to enforce its patents pretty aggressively in different parts of the world. I've seen them demand rather high (though clearly sub-Motorola) royalties over WiFi patents in Germany, and India's antitrust regulator opened two investigations of Ericsson's demands in FRAND licensing negotiations. Also, a document I discovered about a year ago explains why Ericsson prefers to sue device makers rather than do license deals with chipset makers like Qualcomm.

Apple v. Ericsson is definitely a perfect match when it comes to FRAND licensing. Billions of dollars--probably many billions--are at stake. But it's just about money and not about a strategic conflict between direct competitors. By now it's clear that patent holders who thought to protect or gain market share through patent assertions have been unable to achieve such goals, let alone to wage "thermonuclear war," but there still are some financial issues left to be sorted out in the industry, such as Apple v. Ericsson, and some will have to be rediscussed from time to time as existing agreements expire.

Other industry players are interested in more or less zero-zero cross-license agreements, which is what I believe the Google-Verizon deal announced in December is about. Google has done various such deals, including with Cisco, Samsung, and LG. But that's the way Google and some other companies would like it to work. Ericsson is different. Patent licensing is increasingly important to its business.

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Monday, January 12, 2015

Supreme Court wants U.S. government to weigh in on Google's petition to hear Oracle's Android-Java copyright case

The Supreme Court of the United States had put Google's petition for writ of certiorari (request for Supreme Court review) in Oracle's Android-Java copyright case on its list of items to be discussed at the Friday (January 9) conference. The list of decisions, which was just released this morning, indicates that the top U.S. court has not made a decision yet. Instead, "[t]he Solicitor General is invited to file a brief in this case expressing the views of the United States."

In my two previous posts on this case, I explained why I don't consider Google's proposed distinction between allegedly non-copyrightable header and potentially-copyrightable non-header code to be workable, and noted that the software industry at large philosophically opposes Google's petition.

Only about 1 in 100 cert petitions succeeds. But Google apparently hopes that a well-orchestrated (rather than organic) amicus brief campaign (see 1, 2, 3, 4) will persuade the top U.S. court to hear the case.

The Supreme Court appears unconvinced for now that this case really needs to be heard (otherwise it could have decided based on the submissions it already has on file), but in light of Google's amicus brief campaign it apparently wants to double-check whether there really is a key issue at stake here for innovation. That's why the U.S. government is asked to chime in. Google is known to have excellent government relations, but I'm sure the Department of Justice is absolutely aware of the extent to which the software industry--which is so important to U.S. economic growth and employment--depends on legal certainty with respect to software IP protection. A decision to grant certiorari would create enormous uncertainty since Google wants to raise the general question of whether program code, no matter how creative, expressive, original or sizeable, can be devoid of copyright protection. It would be downright irresponsible for the U.S. government to support Google's cert petition because it would discourage investment in software development at least until the case is resolved and, if anything goes wrong, for a very long time. I'm sure the software industry at large, which is firmly on Oracle's side here, will convey that message to its government.

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