Wednesday, August 17, 2011

Miami court deals huge setback to Motorola Mobility's defense against Microsoft

Motorola Mobility's defense strategy against Microsoft's patent infringement lawsuit just suffered a major setback. The best defense in patent disputes is a good offense, but after an order issued today, it's clear that MMI's federal countersuits against Microsoft are not going to trial anytime soon. There are several federal lawsuits going, and the earliest trial date is in late November 2012 -- for the others I haven't even seen a scheduling order, so they will hardly go to trial before 2013.

In the meantime, Microsoft will get a decision on its ITC complaint against MMI. The target date for that investigation, which MMI failed to push back by three months, is March 5, 2012. As I explained two months ago, MMI appears to be on the losing track in that one. The related ITC hearing will start next Monday (August 22).

As odd as it may seem, it's increasingly likely that -- come March 2012 -- Google could be trying to consummate the acquisition of a company that's legally barred from importing Android devices into the United States. How's that for a dowry?

What makes this much worse is the fact that the schedules of the different cases don't offer any chance for MMI to have comparable leverage against Microsoft (in terms of a possible injunction against its core business) for quite some time thereafter. MMI's only near-term hope is an ITC investigation into the Xbox, which is also significantly behind.

Miami-based court granted Microsoft motion to transfer a federal lawsuit from Florida to Washington

So here's what happened:

Today (Wednesday) the Miami-based U.S. District Court for the Southern District of Florida issued an order -- which I have uploaded to Scribd -- granting Microsoft's motion to transfer a Motorola Mobility countersuit from the Southern District of Florida to the Western District of Washington. This means that all federal lawsuits between those two companies -- with the exception of one up in Wisconsin that is stayed for the duration of an ITC investigation -- are taking place in the court of Microsoft's choice.

The Southern Florida case originally had a trial date scheduled for October 2011. On Monday, the court pushed that one back until March 2012. And today, with the venue transfer decision, there isn't even a trial date in sight. Transfers always cause delays, and the court in Southern Florida is very fast -- one could almost consider it a "rocket docket". Microsoft had made counterclaims there, which would have been decided at the same time. Still, it makes a major tactical difference that MMI doesn't have any chance of serious disruptive impact on Microsoft's business for what is almost an eternity in this rapidly-evolving industry.

I have said it before and I will say it again: MMI's patent portfolio isn't that great. Contrary to popular misbelief, those patents are a pretext for something else rather than the primary reason for the deal. In the reasoning for its downgrade of Google (target price down from $700 to $500, rating from "buy" to "sell"), Standard & Poor's said that "[S&P's analysts] are not sure [MMI's patent portfolio] will protect Android from IP issues". But apart from the highly questionable strength of those patents in general, MMI -- or "Googlorola", if you will -- now has a huge tactical disadvantage against Microsoft.

Updated battlemap shows the effect of a series of transfers

I have produced a battlemap and slideshow (along with reference lists) visualizing the evolution of this dispute:


If you click through the slideshow, you'll see that from October 2010 on (when it all started with Microsoft's ITC complaint and federal lawsuit), there was some escalation until mid-February. On February 18, the first of various Wisconsin lawsuits started by MMI was transferred to Washington. That was basically the beginning of the end of MMI's plan to engage in what a Microsoft filing in Florida labeled "scattershot litigation across the country" that "exhaust[ed] the resources of multiple federal judicial districts".

In early April, another Wisconsin lawsuit was transferred to Washington. At this stage, all that was left (and still is left now) in Wisconsin is a lawsuit that is stayed for the duration of an ITC investigation. Even that one would most likely be transferred to Washington whenever it is resumed. The court wasn't against a transfer but didn't want to spend time on a stayed case.

Then there was today's order concerning the Florida case. Since it was the last active federal lawsuit between the two companies that had not yet been transferred to Washington, Microsoft's lawyers called it "this last remaining, rogue action" and urged the transfer that they finally won today.

The Miami court took some time to give consideration to the motion to transfer venue and MMI's vehement opposition. The court recognized that it was a better use of court resources to consolidate all federal litigation between those two parties in one district, and highlighted the court's "limited deference to Motorola's choice of a venue which is not its residence".

This outcome is a very important development in and of itself -- but even more so in light of Monday's "Googlorola" announcement.

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