Wednesday, January 18, 2012

Microsoft asks ITC to take closer look at Motorola's 'wide-scale infringement of Microsoft patents'

Following a December 20, 2011 initial determination (i.e., preliminary ruling) that Motorola Mobility's Android devices infringe four claims of a Microsoft patent, both parties asked the Commission (the six-member decision-making body at the top of the ITC) to review, rather than adopt, the recommended decision. Motorola would like to do away with the infringement finding, while Microsoft would like to prevail on up to five additional ones of the seven patents the initial determination related to.

The parties filed their petitions for review on January 5, 2012, and replied to each other's petition last Friday (January 13, 2012). Today, a public redacted version of Microsoft's 108-page petition for review and a 13-page summary became available on the ITC document server.

I have read those documents. They reference many other documents that are not publicly available, but despite those access restrictions and even prior to having seen Motorola's response, it's already possible to discuss the issues that have been raised.

While some of the issues are very specific to the technical scope of the asserted patents and differences between the claimed inventions and prior art, it appears to me that Microsoft's petition is partly based on general issues transcending this particular investigation. Some of those issues can come up in ITC investigations relating to any field of technology, and some of them are particularly likely to resurface in other investigations of smartphones and tablet computers. With respect to the ITC's domestic industry requirement, the ID applies certain criteria that would affect all U.S. software companies, large ones and small ones, that might bring ITC complaints in the future. Given what's at stake way beyond this investigation, I would not be surprised if the Commission identified a number of issues that warrant further analysis and require clarification.

In the following sections, I will summarize some of the issues that I, from my personal vantage point, found worth reporting. Some of the issues I don't mention here may nevertheless be key to this particular investigation.

'Wide-scale infringement'

In the introductory section, Microsoft states its conviction that Motorola Mobility's Android devices infringe more patents than the one based on which the initial determination identified a violation. That's obvious to anyone looking at the overall Microsoft-Motorola dispute, which is far larger than this ITC investigation.

The first sentence of Microsoft's petition asserts "MMI's wide-scale infringement of Microsoft patents in its imported Android mobile devices". In the second paragraph, Microsoft recalls its "efforts to simplify the case by limiting its infringement contentions and dropping some originally-asserted patents". Microsoft dropped two of its nine originally-asserted patents prior to the initial determination, and its petition for review effectively drops another one by not asking for a review of any issues relating to that one.

Despite this streamlining, Microsoft concedes that "this is, even by the standards of the Commission, a complicated case" involving "sophisticated computer technology" and "multi-faceted MMI Android devices (which aggregate many features in a single imported device)". The complexity of the case and the alleged "scale of the infringement" resulted in what Microsoft calls "an unquestionably lengthy and complex record". Concerning the scope of the infringement, Microsoft alleges that "[i]nstead of developing its own operating system technology [and making similar investments as Microsoft], MMI has chosen to stand on the shoulders of Microsoft's patented inventions", a behavior also labeled as "wholesale copying".

In light of the foregoing, Microsoft's petition says that "a patent owner should not be penalized for acting broadly against multiple infringing aspects of multiple complex devices". The petition as a whole is full of examples in which the initial determination reflects confusions and errors that Microsoft attributes to the complexity of the case. But Microsoft essentially calls on the ITC to give patent holders a fair chance to enforce their rights:

"Indeed, any other conclusion would mean that the Commission would effectively limit itself to addressing unfair competition only in simple cases involving simple products, one or a few patents, and relatively small domestic investments. But limiting the scope and reach of the Commission's powers to small domestic industries is plainly inconsistent with the Commission's charter, and with the public interest."

In other words, Microsoft says the ITC has a broad mandate, and encourages it not to let large-scale infringers get away with their misconduct. Microsoft then expresses its disappointment over the fact that "the Initial Determination ('ID') has precisely this effect [of narrowing the ITC's mandate]". Microsoft then cites some examples of ways in which it believes the scope and complexity of the investigation provoked legal errors and factual confusion. One of the assertions in this context (just to provide an example) is that "the ID expressly found that the Accused Products operate contrary to the sworn testimony of MMI's designated technical witness".

Like I said, I have access only to some of the documents and other material, and I didn't attend the evidentiary hearing in August 2011, but many elements and aspects of the initial determination indeed struck me as being quite different from the way other Administrative Law Judges at the ITC and federal judges at district courts apply U.S. patent law. To the extent that general principles of claim construction are concerned, the initial determination also appeared to apply some of the chosen constructions much more narrowly than what I monitor in jurisdictions like Germany.

In general, it's a good thing if complainants face a reasonably high hurdle to prove a violation, but if the standard is that even the sworn testimony of the other party's technical witness doesn't do the job, then it becomes virtually impossible to meet regardless of the actual merit of a claim.

Issues surrounding the presentation and weighing of evidence and arguments

The initial determination repeatedly (mostly but not exclusively to Microsoft's detriment) dismissed claims by alleging, in other words, that something had not been pled with sufficient particularity, or not been presented at the right time. Interestingly, Microsoft's petition for review complains that the initial determination is based in part on representations made by Motorola after the evidentiary hearing, even though any evidence would have had to be provided before the hearing and legal argument cannot serve as a substitute for evidence.

The timeliness of contentions and evidence plays a role in many litigations, and frequently in ITC investigations, but the density of those types of issues appears to be extremely high in this case. The standards that the Commission may or may not affirm in its review could have implications for the decisions made with respect to several patents in this investigation, and many patents in other investigations.

Software companies and the domestic industry requirement

In order for the ITC to find a violation of a patent, it must be valid and infringed but there must furthermore be a "domestic industry" for it. The domestic industry requirement is unique to the ITC. There's no such thing at a district court.

The statute governing the ITC (Sec. 337) doesn't require that domestic industry to be a domestic manufacturing industry. There are different ways to satisfy the requirement, and an investment in product development is one possibility. But the initial determination denied the existence of a domestic industry with respect to four patents. To some extent, that's because of narrow claim construction, but the initial determination also arrived at a rather unusual finding with respect to Windows Mobile, suggesting that there wasn't enough evidence of actual devices having a certain kind of functionality.

The software industry is very important to the U.S. economy. That's why the Commission might be interested in looking more closely, as Microsoft requests, at the parts of the initial determination that relate to the existence of a domestic industry if the complainant makes software available to device makers. Microsoft is just one of many companies that license their software to OEMs. There are companies of all sizes, including some very innovative startups, that do business that way. From a policy point of view, the ability of software makers to enforce their intellectual property rights with the ITC's help is a high-priority question. The way I read the (current) statute, the ITC's mandate includes complaints brought by right holders of that profile.

Induced infringement

Even with respect to the one patent the initial determination deemed violated, there's a legal issue that Microsoft's petition addresses. Motorola was not held to induce the infringement of Microsoft's '566 patent (but only to infringe directly). Apparently, the initial determination applied the U.S. Supreme Court's "willful blindness" standard, which Microsoft says is only meant to be "a substitute for proving actual knowledge of the asserted patents", and not applicable here if one assumes that Motorola had knowledge of Microsoft's asserted patents (at least after it received the complaint). The simplest and clearest case of induced infringement is one in which knowledge of the patent is proven. Willful blindness is just an alternative concept to cover cases in which someone would have to know but makes an effort not to know.

Induced infringement results in additional liability, and Microsoft would like to prevail on that count as well.

Cease-and-desist order

The initial determination recommended an import ban but not a cease-and-desist order. The cease-and-desist order would additionally ensure that any infringing devices that were imported prior to the import ban taking effect (but are still, at the relevant time, in a Motorola warehouse) could no longer be sold.

If an import ban is ordered without a simultaneous cease-and-desist order, it may take quite a long time before an infringer has sold off all of the infringing inventory. But more recently, the ITC appears to be hesitant to issue cease-and-desist orders. For example, no cease-and-desist was ordered against HTC though it was found to infringe a valid Apple patent.

The public redacted version of the petition doesn't reveal some of the specifics of Motorola's logistics. Therefore, I don't know if there are differences between Motorola's and HTC's respective operations that suggest a different decision in Motorola's case. It's possible that Motorola keeps far larger quantities of its products in stock than HTC does in the U.S. market.

What's next?

I hope that a public redacted version of Motorola's response to Microsoft's petition will become available shortly. It's a given that Motorola will defend, except with respect to the '566 patent, the initial determination as best as it can. In February we'll find out which issues the Commission decides to review. Depending on the scope of the review, I may then go into some more technical detail. The petition for review contains some interesting technical arguments and explanations, but for the time being I wanted to focus on broad and general issues that were raised and that may also come up, in similar forms, in other ITC investigations that I'm monitoring.

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