Thursday, June 2, 2011

Microsoft's dispute with Motorola streamlined in Washington state; Southern Florida case might be transferred

Since Microsoft filed its first Android-related patent infringement lawsuit against Motorola in October, many people's attention has shifted to some of the other smartphone patent complaints that have been filed in the meantime, including some very big ones such as Apple v. Samsung. There's also a lot of interest all the time in Oracle v. Google. But Microsoft v. Motorola continues to be an important dispute involving 23 Microsoft and 21 Motorola patents, and there has been some progress.

In the most recent development, two of the lawsuits have been consolidated into one, and a couple of Microsoft's causes of action related to Motorola's contractual obligations to make patents available on RAND (reasonable and non-discriminatory terms) have been considered duplicative.

There is also a possibility of a lawsuit in the Southern District of Florida being transferred to the Western District of Washington, where all other litigation between Microsoft and Motorola is already happening apart from their ITC complaints and a Western Wisconsin lawsuit that is stayed because it mirrors the respective ITC complaints (and could also be transferred if and when resumed).

In order to put all of this into context, let me show you the current battlemap and then discuss how this dispute evolved, what the Washington-based judge just ordered, and what may be next. Here's the battlemap:

You may have noticed that the above image is dated April 9, 2011. That's because the most recent court order has not changed the battlelines as I show them in my charts: the parties are still asserting the same claims against each other in the same venues as per April 9 (when one of the Wisconsin suits was transferred to Washington). The most recent order just streamlined some of the litigation going on in Washington. Should the South Florida case be transferred (as proposed by Microsoft), the battlelines will change and then I will publish an updated version of that graphic in a new blog post. The battlelines would also change if a new suit was filed or a suit (or one or more patents asserted in a suit) dropped.

Here's a brief recap of how the dispute escalated in the fourth quarter of 2010 and has been gradually streamlined in recent months:

  • Microsoft filed an ITC complaint and a companion federal lawsuit (in the Western District of Washington) over nine patents on October 1, 2010.

  • On November 9, 2010 Microsoft lodged another complaint against Motorola (in the Western District of Washington) related to its commitments to offer licenses to certain standards-related patents on RAND (reasonable and non-discriminatory) terms. That RAND case is one of the two lawsuits affected by yesterday's order. It's one of the two cases that were consolidated into one, and the court also dismissed a couple of claims that were considered duplicative. I'll talk about that order further below.

  • The day after the RAND complaint, Motorola countersued Microsoft. There were three simultaneous complaints, two in West Wisconsin (one of which has in the meantime been transferred to Washington and was also affected by yesterday's order) and one in South Florida.

  • On November 22, 2010 Motorola also filed an ITC complaint against Microsoft (over the Xbox 360). To those following ITC investigations it may be an interesting detail that the ITC staff (the Office of Unfair Import Investigations), which has the role of a third party representing the public interest, has resource constraints and therefore doesn't participate in all proceedings (still in most of them, but not in all of them). The investigation of Motorola's complaint against Microsoft was one of a minority of investigations that the ITC staff decided not to spend time on.

  • On December 23, 2010, both parties filed new claims against each other: Motorola filed another suit in the Western District of Wisconsin (the third one in this dispute to be filed there) and Microsoft made counterclaims in the South Florida case.

  • On January 19, 2011 Microsoft counterclaimed in the third Wisconsin suit, and on January 25, in the first Wisconsin suit. After those counterclaims, the number of patents asserted by Microsoft exceeded that of Motorola's patents for the first time after the period between Microsoft's original complaint and Motorola's first wave of countersuits.

  • On February 14, 2011 Motorola amended its third Wisconsin complaint and added two patents. The number of Motorola's patents-in-suit still stayed below that of Microsoft's patents-in-suit. This was -- to date -- the last step of escalation. There haven't been new patent assertions since, and thereafter the dispute started to streamline.

  • On February 18, 2011 the first Wisconsin suit (including some counterclaims by Microsoft) was ordered to be transferred to Washington.

  • On April 1, 2011 another Wisconsin suit (the third one Motorola had filed there) was also ordered to be transferred to Washington. At this stage, the only one of the three original Wisconsin suits not to have been transferred to Washington was one in which the parties are asserting the same patents against each other as in their ITC complaints -- and those claims are stayed pending the related ITC investigations. So in practical terms, Motorola's attempt to shift the center of gravity of the dispute to Wisconsin had already been thwarted. Microsoft had a first-mover advantage here but Motorola also couldn't really convince the court in Wisconsin that the case had much of a connection with that state. Washington State is where Microsoft is based and where the dispute started. Motorola, however, is based in Illinois, not in Wisconsin.

  • On May 19, 2011 Microsoft filed a motion to transfer the South Florida case to Washington. Apart from the Wisconsin case that is stayed anyway, that is the last lawsuit between the two parties not to be taking place in Washington. Considering that most of the action is in the Western District of Washington and neither of the parties has a particularly close connection with South Florida, it would obviously be more efficient to transfer that case as well. Within the Continental U.S. (the "Lower 48" states), South Florida is as far from Western Washington as it gets. But should the South Florida case -- for whatever reason -- not be transferred, then it might become the first federal lawsuit between the two companies to go to trial, and the counterclaims Microsoft made there could affect a number of Motorola products, even including some set-top boxes.

And now let's look more closely at yesterday's court order. In terms of the number of asserted patents, the case consolidated into the RAND case is the "smallest" one of the lawsuits between the parties. Motorola asserts three video codec patents, and Microsoft made counterclaims over two patents (a browser patent and an input panel patent).

Microsoft moved to dismiss Motorola's three codec patent claims as a stand-alone lawsuit and wanted Motorola to file them as counterclaims in Microsoft's RAND lawsuit. The outcome is now essentially the one that Microsoft wanted: while the court formally denied Microsoft's motion to dismiss that particular infringement suit, the RAND case and that infringement suit were consolidated into one. The legal difference is that the court did not see reasons that would "dictate that the issues be resolved in one lawsuit" but found that "these cases are appropriate for consolidation because the actions involve at least some common questions of law or fact, and the interests of judicial economy will be served by consolidation." Again, the net effect of this is what Microsoft apparently wanted: to address those claims in the same lawsuit. It's just that the court used a slightly softer reasoning to get there, basically saying this: "we don't have to, but it makes sense to us anyway, so let's do it."

Motorola wanted Microsoft's RAND case dismissed as a whole. One of Motorola's arguments was that Microsoft should not have sued prior to concluding a negotiation over the relevant license fees. Microsoft's complaint was (in my understanding) based on Microsoft considering an offer made by Motorola to be out of line with its commitment to standardization bodies to make such patents available on RAND terms if they are essential to a standard (if they aren't, then this issue goes away, but then Microsoft will claim that it doesn't need a license to them because it doesn't infringe them).

For the most part, the court disagreed with Motorola and lets Microsoft's RAND case continue, at least for now. But a couple of Microsoft's causes of action were dismissed. The court ruled that a waiver can be a defense but not a cause of action. Since the RAND case and Motorola's patent assertions were consolidated, there may not be much of a practical difference here anyway (as far as those three video codec patents are concerned). Furthermore, the court dismissed Microsoft's declaratory judgment claim because it was considered "duplicative" of some other claims.

It seems to me that those dismissals don't really help Motorola. If Motorola's motions for dismissal had made any of the issues go away, that would have been useful. But the dismissals apparently fell short of that. As far as I can see, the same questions are still on the agenda and the claims that were dismissed appear to have lost relevance due to the consolidation decision that was taken.

It's interesting to see that a dispute consisting of so many different lawsuits poses quite an administrative and procedural challenge. Some streamlining has without a doubt occurred, and we may still see some more of it (especially concerning the South Florida case). When everything's been restructured, the focus will again shift to the substance of those federal lawsuits -- and let's not forget about the ongoing ITC investigations. In the investigation of Microsoft's complaint against Motorola, a claim construction order was recently issued by the Administrative Law Judge, which is significant progress.

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