Friday, April 13, 2012

German court might ban iPhone and iPad again within a few months -- same Moto patent as last time

At the Mannheim Regional Court, I just attended the pronouncement of a Motorola v. Apple decision by Judge Andreas Voss (his last name spells "Voß" if not transcribed). A (second) decision was due today in the matter in which a default judgment had been entered against Apple in early November after Apple's counsel didn't show up for the originally-scheduled trial in late October. After Apple objected to the default judgment, a second trial took place on February 3, 2012 (with all the lawyers). The default judgment related to the following two patents:

  1. an allegedly standard-essential patent:

    EP (European Patent) 1010336 (B1) on a "method for performing a countdown function during a mobile-originated transfer for a packet radio system"; this is the European equivalent of U.S. Patent No. 6,359,898

  2. a non-standard-essential push notification patent:

    EP (European Patent) 0847654 (B1) on a "multiple pager status synchronization system and method"; this is the European equivalent of U.S. Patent No. 5,754,119

If those two patents seem familiar to you, that's because the Mannheim court previously adjudicated Motorola's infringement claims based on those two patents with respect to Apple Sales International, Apple's Ireland-based European distribution center, while the defendant in the matter in which a decision was due today is Apple Inc. of Cupertino, California -- the parent company of the Irish operation.

Judge Voss explained that the claims targeting Cupertino had been severed from those against Apple Sales International because it took longer to serve the complaint(s) on Apple's U.S. parent company than it did within Europe. The Munich I Regional Court has the same practice in patent cases: in order to avoid delays, proceedings start even before all legal entities have been served. Most of the time, the decision in the delayed case simply mirrors the one in the actions against the first-served entity, but sometimes different facts come up even if the same patents and accused technologies are at issue. In this particular case, the decision with respect to one patent (the non-standard-essential push notification patent) mirrors a previous one, while there are somewhat different issues with respect to the standard-essential patent.

I know this is now getting somewhat ocnfusing because of all these procedural twists and turns, but I'll explain. I'll start with the non-FRAND patent because there was a final Mannheim decision on that one, and then discuss the situation surrounding the standard-essential one.

On February 3, Motorola won an injunction against Apple Sales International based on the push notification patent. Motorola immediately sought enforcement, but this takes a couple of weeks (among other things, security must be provided, in this case amounting to 100 million euros). On February 24, it became known that Apple was forced to deactivate push notifications for all customers accessing the email services of iCloud or MobileMe from German territory. Apple immediately appealed (primarily disputing the validity of the patent-in-suit) and asked the appeals court, the Karlsruhe Higher Regional Court, to suspend enforcement for the duration of the appellate proceedings. But on March 14, the appeals court denied Apple's request for reprieve.

Against that background, it's no surprise at all that the Mannheim court simply recycled its previous decision on this patent, now with respect to another Apple legal entity.

The required security again amounts to 100 million euros. The judge didn't say that a deposit in one of the two push patent cases would be accounted against the one required in the other case.

Interestingly, the judge said that the enforcement of the default judgment could now be "resumed" within the scope of today's substantive ruling. The word "to resume" indicates that Motorola indeed sought enforcement of the default judgment, a fact that could add to Motorola's EU antitrust worries since the enforcement of a non-substantive ruling based on a standard-essential patent could be seen as exceptionally aggressive conduct. Anyway, that attempted enforcement never had an effect (otherwise Apple would have had to make an announcement). Not long after the default judgment was entered (this blog was first to publish it), I already explained that Apple needed, and was most likely going to win, a suspension of the enforcement of the default judgment until a substantive decision would be taken. That substantive (i.e., non-default) decision came down today, and that's why the suspension ended.

The ruling against Apple Inc. only relates to what the company does in the German market. I don't expect Apple's customers to be affected in any way that would go beyond the deactivation of push notifications that's already in place. For Motorola it's nevertheless useful to have this decision in place against Cupertino as well. It makes it harder for Apple to circumvent the injunction (which it didn't try, but who knows what it might have done later) and it's another legal entity from which Motorola can claim damages (if it fends off Apple's appeal, which I'm sure is going to be filed shortly).

Standard-essential wireless patent could still result in German sales ban, despite Apple's recent win of a suspension

Motorola's unrelenting pursuit of injunctive relief based on standard-essential patents is, by now, pretty notorious. Therefore, it keeps on fighting for a sales ban of the iPhone and 3G-capable iPads in Germany despite an appeals court's recent suspension of the enforcement of an injunction based on the same patent against Apple Sales International. The appeals court felt that Apple's offer to take a license to Motorola's standard-essential wireless patents (pursuant to the horrible Orange-Book-Standards framework) was more likely than not to be so good that its continued refusal by Motorola would constitute a case of antitrust abuse, a basis on which injunctive relief would have to be denied. But Motorola is willing to still fight for its position that it has the right, without breaching applicable competition law, to reject Apple's offer, and the Mannheim court is, to say the least, rather skeptical of the appeals court's preliminary analysis.

The perfectly logical thing for a FRAND-friendly court to do would have been to follow the preliminary line of its appeals court in Karlsruhe and deny Motorola injunctive relief as far as that standard-essential wireless patent is concerned. That could still happen, but it's already a bit of a surprise in and of itself that the Mannheim court creates another window of opportunity for Motorola to win a German sales ban against the iPhone and all 3G-capable versions of the iPad. Judge Voss said that the court decided on Wednesday to sever (break up and turn into a separate case) the part of the default judgment case that relates to the FRAND patent because the parties made new representations that the court is now looking at. I believe there will be another trial (unless there's an agreement to decide based on only the written pleadings).

I stand by my assessment of Apple's win of a suspension that the offer Apple made (for taking a license to those patents) is either already sufficient as it stands or otherwise Apple just needs to make limited further concessions. But Judge Dr. Tochtermann, the vice president of the panel presided by Judge Voss, said at a recent conference on FRAND litigation that he personally had some doubts about the reasoning underlying the suspension. The legal issue there is whether a would-be licensee (in this case, Apple) can reserve the right to raise some rather fundamental issues, such as exhaustion- and licensing-based defenses, in connection with the future determination of a FRAND royalty rate, or whether all of this needs to be waived early on. In my opinion, it would be totally against the concept of justice, and of the rule of law as well, to let the holders of standard-essential patents abuse their leverage to deprive a would-be licensee of such important arguments -- but here in Germany, there are clearly judges who go out of their way to support the owners of such patents.

In a legally technical sense, the suspension of enforcement that Apple won was not a final decision by the appeals court. Should the Mannheim court now follow Motorola's argument and order an injunction against Cupertino, then it can try to provide reasons in its decisions that it hopes will persuade the Karlsruhe Higher Regional Court when Apple asks (as it certainly will in that case) for a suspension of the enforcement of that injunction. It would also be another opportunity for Motorola to optimize its argument in favor of its highly problematic rejection of Apple's offer.

There's another reason for which Motorola's continued refusal of Apple's offer and the fact that the Mannheim court doesn't consider this a clear case in which to deny injunctive relief are all the more surprising. Ten days ago, the European Commission launched formal antitrust investigations against Motorola following complaints by Apple and Microsoft over this kind of conduct.

Just like I pointed out that the Karlsruhe Higher Regional Court's suspension of the enforcement of the standard-essential patent injunction against Apple Sales International was only a preliminary, summary determination, the launch of formal antitrust investigations merely indicates that abuse is suspected, not that it's definitively proven. Many suspects of antitrust abuse are ultimately cleared. But the overall circumstances here are that both a preliminary determination by the Karlsruhe-based appeals court and a preliminary analysis by Europe's top antitrust enforcer strongly suggest that Motorola is guilty of anticompetitive misconduct. In light of this, it really should have been a very easy decision for the Mannheim court to deny injunctive relief today, as opposed to opening yet another window of opportunity for Motorola.

We will see what the decision is going to be. If there's another trial, I'll be sure to attend.

The same patents are also in play in Düsseldorf

Not only is Motorola asserting these two patents (and a third one, but Mannheim ruled against Motorola on that one for technical, not FRAND-related, reasons) against two different Apple legal entities in separate proceedings in Mannheim, but it's also suing the legal entity operating the German Apple Stores, Apple Retail Germany GmbH, in another city, Düsseldorf, over those same patents.

I'm not yet aware of any trial dates in Düsseldorf, but it probably won't take long. By the way, Düsseldorf is in the process of recruiting more patent infringement judges in order to catch up with the speed of the courts in Mannheim and Munich.

The Düsseldorf Regional Court is part of a different circuit. Its appeals court is the Düsseldorf Higher Regional Court. It could be that the appeals courts in Düsseldorf and Karlsruhe will make inconsistent decisions on the same issues in parallel proceedings.

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