Friday, October 14, 2011

Samsung loses Dutch case against Apple over 3G patents as court gives meaning to FRAND

Regardless of whatever Google's CEO may say in an effort to assuage investors' concerns, this week may very well go down in history as the one in which Apple's intellectual property enforcement against Android reached a tipping point in Cupertino's favor. The famous reality distortion field may have to move up from 1 Infinite Loop to the GooglePlex in Mountain View at least as far as intellectual property matters are concerned.

Apple has not yet dealt a fatal blow to Samsung, but it's on an impressive winning streak and making headway at a breathtaking rate. I expected Apple to do well, but the results have exceeded even my expectations. Just this week,

  • Apple won its third preliminary injunction against Samsung in Australia (following similar, earlier decisions by courts in Germany, the Netherlands),

  • a federal judge in California expressed her belief that Samsung infringes some design patents held by Apple (even if doubts about the validity of those rights have to be addressed by Apple in order to win a US-wide preliminary injunction), and

  • today the Rechtbank 's-Gravenhage (a Dutch court based in the city of The Hague) made it clear that Samsung won't be able to win an injunction against Apple's products based on standards-essential, FRAND-committed patents. As a result, Samsung's motions for preliminary injunctions against the iPhone 4S in France and Italy are also very likely to be denied, though the courts in those countries have the right to take different decisions than their Dutch counterpart.

Apple still has miles to go until Samsung will really have no other choice than to back down and agree to a settlement on Apple's terms. Such a settlement would likely force Samsung to redesign its products, to remove certain functionality, and to pay royalties for those patents Apple is willing to license at all (without a legal obligation).

Samsung, however, appears to lack patents of the kind that would create a serious counterthreat. Under these circumstances, the only question is when, not if, Apple is going to get its way. If Samsung cannot obtain injunctions, there isn't a threat of mutually assured destruction, and Samsung is strategically lost.

Samsung will have to look for unencumbered patents. Maybe it has some hardware patents (such as antenna patents) that could be used to exert pressure on Apple. But so far, Samsung's lawyers rely mostly on FRAND-pledged standards patents, which appears to be a losing strategy.

Samsung is using at least 13 different FRAND-pledged 3G patents against Apple in nine countries. Apple's strongest patents -- unlike Samsung's (and Motorola's) -- are not FRAND-encumbered. Apple is in its right to seek injunctions. That's the difference.

Bad news for Samsung (and Google and Motorola Mobility), but good news for the technology industry at large

This ruling is good news for most players in the technology industry and should serve as a warning to desperate litigants who, for a lack of powerful non-standards patents, attempt to leverage FRAND-pledged patents in order to shut down their adversaries' products.

Motorola Mobility is another example of a desperate, embattled player trying to use FRAND-committed patents (against Apple and Microsoft). Like Samsung, Motorola Mobility has many patents, but apparently lacks unencumbered patents of the kind that would give it major leverage. Therefore, Google's acquisition of Motorola Mobility is not going to be the game changer as which Google announced it.

Patents aren't all the same. In a commercial sense, standards-essential patents are first-class citizens, but they are not suitable as strategic weapons. Their retaliatory power against a company wielding unencumbered patents is zero, provided that all courts decide along the lines of today's Dutch decision.

Key points of today's ruling

Today's Dutch ruling that couldn't be any clearer. Here are a few key points:

  • An injunction against Apple is out of the question. At most, Samsung can expect to receive FRAND royalties. The court formally dismissed Samsung's request for a preliminary injunction.

  • Samsung argued that its 3G-related FRAND promise was more of a solicitation of inquiries from interested parties than a binding and enforceable commitment. The court, however, ruled that it's an offer to negotiate an agreement on FRAND terms, and Apple and other parties can accept such an offer. An offer and a coextensive acceptance lead to an enforceable contract under the law in most European countries. In this case, the contract is under French law because ETSI, the standard-setting organization relevant to this case, requires participants in its standard-setting processes to enter into agreements under French law.

  • At a hearing on September 26, it turned out that Samsung was seeking a royalty of 2.4% of the chip price for each (!) of its asserted patents. In today's ruling, the Dutch court says that Samsung's offer was so far out of the FRAND ballpark that, in the court's opinion, Samsung has failed to honor its obligation to make an offer on FRAND terms.

  • Formally, Apple's counterclaims in this FRAND case were also dismissed, but that doesn't matter. Those were just an enhanced defense. Apple's defense succeeded anyway. That loss has no impact whatsoever on Apple's own assertions against Samsung.

There will be a hearing at the Tribunal de Grande Instance de Paris on Thursday of next week on Samsung's motion for a preliminary injunction against the iPhone 4S in France. That motion is also based on 3G standards patents. I am sure Apple's lawyers will present a certified French translation of the Dutch ruling to the French court.

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