Monday, April 23, 2012

Court to hold hearing on July 5 to discuss if Apple's 'antisuit lawsuit' against Motorola can proceed

In February, Apple brought an "antisuit lawsuit" -- a lawsuit aiming to preclude another party from bringing and pursuing litigation -- against Motorola with respect to patent assertions targeting the iPhone 4S, arguing that Apple, as a third-party beneficiary to a license agreement between Qualcomm and Motorola, is shielded against such litigation. The next major milestone in this process will be a hearing that the United States District Court for the Southern District of California (Qualcomm's home court) today scheduled for July 5, 2012 -- the day after Independence Day. On or after that day, Judge Janis Sammartino will decide whether Apple's lawsuit can proceed or is dismissed (possibly with prejudice). If it goes forward, Motorola will then get a few weeks to (finally) respond to the complaint.

Apple's antisuit lawsuit seeks declaratory as well as injunctive relief. Apple asks the court to hold that Motorola's patent rights are exhausted with respect to Apple products incorporating the Qualcomm MDM6610 baseband chip (presently that would come down to the iPhone 4S). Additionally, Apple hopes that Motorola will be formally barred from pursuing such claims.

Antisuit lawsuits aren't the bread-and-butter business of U.S. courts, but Microsoft has shown in the Western District of Washington (which belongs to the Ninth Circuit just like the Southern District of California) that antisuit injunctions are available under special circumstances. Microsoft won a temporary restraining order against Motorola, but the legal theories and fact sets are very different. Microsoft had a strong argument because it brought a lawsuit to enforce Motorola's FRAND obligations back in November 2010, prior to any patent assertion by Motorola against Microsoft and roughly eight months before Motorola's German lawsuits against Microsoft. Also, while Apple's prayers for relief are quite comprehensive, Microsoft's request for a temporary restraining order was limited to an injunction against the near-term enforcement of a potential German injunction. And by the time Microsoft brought this motion, it had already made some headway on the legal issues in the case by means of summary judgment. But even if Apple's antisuit lawsuit faces a steeper challenge, it could succeed if there's really a strong patent exhaustion argument -- which is impossible to ascertain (and equally impossible to rule out) without access to the (sealed) Qualcomm-Motorola agreement.

The scope of Apple's complaint has actually narrowed since the original one in February. Three weeks later (on March 7), Motorola brought a motion to dismiss (or stay). At the time, it basically raised two kinds of arguments. Motorola claimed that Apple didn't properly state claims that are subject to federal law, and it argued that the U.S. court shouldn't interfere with a German court case that was already at an advanced stage. On April 2, Apple amended its complaint. The amended complaint stressed that each of the issues Apple raised "exceeds $75,000 in value to Apple", thereby meeting the threshold for litigation in federal court instead of state court. And more importantly, the amended complaint explicitly excluded Germany from each and every claim and prayer for relief. This mooted Motorola's objections concerning interference with the German proceeding. This is purely conjectural but knowing how extremely tough (in my opinion, sometimes even unfair) the German courts are on defendants raising the so-called Orange-Book-Standard defense against standard-essential patents, it's also possible that Apple preferred not to call into question its commitment to the licensing proposal it had to make in Germany under the Orange-Book-Standard rule.

On April 10, Motorola withdrew its original motion to dismiss and promised to "answer, move, or otherwise respond to the First Amended Complaint [...] no later than April 19, 2012". It then chose the second option -- "move" -- and brought a new motion to dismiss. Unfortunately, the new motion to dismiss was sealed, and today the federal judge presiding over the case granted the request to seal the entire motion (there's no public redacted version) in order to protect confidential business information relating to the Qualcomm-Motorola patent license agreement. Therefore, it's not clear why Motorola believes Apple's lawsuit is so pointless it should be dismissed right away.

Motorola filed only three exhibits in public. Those include an excerpt from the official Steve Jobs biography (the well-known part about "willing to go thermonuclear war") and two articles about Apple's patent assertions against Android in general (particularly HTC). None of those public exhibits have anything to do with Qualcomm. Presumably, Motorola's theory is that Apple was an aggressor and, therefore, Motorola believed it had the right to terminate its license agreement with Qualcomm with respect to Apple as a third-party beneficiary. Such termination is, most likely, a violation of Motorola's FRAND licensing obligations to ETSI (and probably also under antitrust law). Courts in different European countries have held that Samsung, which is advised by the same lawyers in the U.S. as Motorola, did not have the right to terminate its patent license agreement with Qualcomm with respect to Apple as a third-party beneficiary given that ETSI requires participants in standard-setting processes to grant irrevocable licenses. The European Commission is formally investigating, in separate cases involving overlapping issues, the conduct of Samsung and Motorola.

It may be difficult to find out anything, other than the basic result of whether or not the lawsuit goes forward, about Motorola's motion to dismiss. Apple has until May 17 to respond, and Motorola can reply within a week of Apple's answer if it wishes. Given that the entire motion is hidden from the public, it's possible that the related briefs will also be sealed, and the hearing will probably be closed.

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