Thursday, December 15, 2011

Microsoft v. Motorola: three Munich hearings in a row, second hearings scheduled for March and April

On a German discussion forum I recently saw a funny remark: "Smartphones are designed in California, manufactured in China, litigated in Germany."

Actually, most wireless patent litigation is still taking place in the United States, exhausting the resources of the ITC and multiple district courts. But the number two jurisdiction in terms of litigious activity in these disputes is indeed Germany. It's one of the largest markets in the world. Injunctions -- the ultimate leverage in any settlement negotiation -- are a given once there's proof of an infringement of a valid patent. And its court are fast, with Mannheim and Munich moving roughly twice as fast as the ITC (and the ITC is still faster than most United States district courts). For example, while the ITC sets target dates of approximately 18 months in most cases (counting from the launch of the investigation, which is about a month after the filing of the complaint), the Munich I Regional Court aims to resolve patent infringement cases within 6 to 10 months of a complaint. And that's a full-blown main proceeding, not a fast-track process for a preliminary injunction, which would be a different matter.

With the sole exception of Oracle v. Google, every major smartphone-related patent dispute is now known to include multiple lawsuits in Germany: Apple v. Samsung (the most internationalized dispute with litigation underway in ten countries), Apple v. Motorola, Apple v. HTC, and Microsoft v. Motorola. The only major dispute settled so far, Apple v. Nokia, also involved litigation in German courts.

The first German court to hand down an immediately impactful decision was the Dusseldorf Regional Court with its preliminary injunction against the Galaxy Tab 10.1, ordered on the grounds of infringement of a design-related right belonging to Apple. However, its reputation as a particularly patent holder-friendly venue has made it exceedingly popular, and slowed it down. In the current wave of wireless patent lawsuits, where time is of the essence, Mannheim is clearly the number one venue, followed by Munich.

Munich has two regional courts, Munich I for the city and Munich II for the surroundings. Munich I is the far more relevant one of the two for commercial litigation in general and patent cases in particular.

Today's Munich hearings weren't trials

Today I went to a "tripleheader" in Munich: three Microsoft v. Motorola hearings in a row. Unlike Mannheim, which usually rules after one hearing, the Munich court typically holds two hearings: a first one after a few months, and a decisive one a few months later. A first hearing is closer to a tutorial (though already somewhat controversial) while a second hearing is essentially a trial.

Today's hearings were first hearings, and it turned out at the hearing today that the related complaints were brought in September. Motorola first mentioned litigation against Microsoft "in Europe" in August, so it was apparently Motorola's initative to export that dispute to Germany. In the United States, Microsoft sued first.

Motorola has brought nullity (invalidation) actions against all three patents discussed today. German first-instance courts stay infringement proceedings only if there's a high probability of a patent being invalidated. Motorola has asked for stays (for the duration of the nullity proceedings), and those requests will be discussed at the second round of hearings.

Given the nature of today's hearings, it's simply too early to predict the outcome. Second hearings have been scheduled for March 15 and April 19, 2012. At that stage it should clearer who's winning. I will go there, and offer my predictions then, or at least something much closer to a prediction than what I can say at this juncture.

Five hours, three patents

Today's tripleheader took more than five hours, with a 50-minute lunch break in between. Three different patents were discussed. All three have in common that they would require a significant, potentially even large number of Android apps to be rewritten and useful functionality to be removed if Microsoft prevailed and Motorola refused to settle. In fact, Judge Peter Guntz mentioned at some point that the inner workings of Android's Dalvik virtual machine are an important consideration.

Motorola's market share in Germany is limited, but if Google obtains regulatory clearance to buy Motorola Mobility (right now that process is put on hold in the EU), it's definitely too important a market for Google to give up.

Tomorrow an Administrative Law Judge at the ITC plans to announce his initial determination (a recommendation for an ITC decision) on Microsoft's complaint against Motorola in the United States. There are many lawsuits underway between those two companies, with more than 50 patents in play. When the court offered its help to broker a settlement, Motorola's counsel said that there were settlement talks in October but no headway has been made, and one of Microsoft's lawyers explained that the German litigations are part of a wider dispute that has its center of gravity in the United States, making a separate settlement of the German actions difficult. He also said that he doesn't believe Motorola is ready to settle as long as the proposed acquisition of the company by Google is pending regulatory review.

These are the patents that were discussed today (each patent is at the heart of a separate lawsuit) in the order of the hearings:

  1. EP0669021 on "multi-lingual computer programs"

  2. EP1304891 on "communicating multi-part messages between cellular devices using a standardized interface"

    (primary use case: multi-part text messages)
  3. EP0651328 on an "event architecture for system management in an operating system"

The first one raised most issues. That part of the discussion took more than two hours. The judge expressed doubts about Microsoft's interpretation possibly being too broad in two or more respects. But Microsoft's lawyers -- from the firm of Bardehle Pagenberg, which also represents Apple against Motorola -- explained their reasoning, and the judge found their explanations as well as the objections brought by Motorola's lead counsel -- Quinn Emanuel's Marcus Grosch -- informative. This is the hardest one of the three patents for Microsoft win on, but the judge wouldn't have spent so much time on the exchange of arguments if it were a foregone conclusion that Motorola won't be deemed to infringe on it.

Also, the judge apparently felt that if the ultimate finding is one of no infringement, it might be attributable to suboptimally crafted claims that, if interpreted as Motorola proposes, would be narrower in scope than what Microsoft might have been able to obtain based on the merits of its relevant innovation. In other words, the judge appears to think, on a preliminary basis at least, that Microsoft's patented invention achieved a very significant improvement over the prior art.

I wouldn't write off that patent before the second hearing, though some skepticism is warranted. It also remains to be seen what kind of prior art Motorola has come up with.

The discusssion of the other two patents was shorter, and while there were also questions of whether Microsoft proposed overly broad interpretations, those issues appeared smaller than those surrounding the first patent, but again, all of this is very preliminary and the picture could change considerably between now and the second hearings in March and April 2012. Also, Motorola raised objections that the judge told Microsoft's lawyers they'd have to address in order to prevail.

The presiding judged was open-minded and very receptive to both parties' arguments. Motorola's counsel pleaded in a more concise and focused fashion, but Microsoft'a lawyers are definitely great at explaining technical matters to a legal audience.

They are now going to file additional briefs, and in the spring we'll know what comes out of this. In the meantime there'll be some Mannheim hearings involving these two parties.

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