Tuesday, April 24, 2012

Preliminary ITC ruling holds Apple to infringe a 3G-essential Motorola patent

Today, Administrative Law Judge Thomas B. Pender gave notice of his initial determination on the investigation of Motorola's October 2010 complaint against Apple. Out of four patents asserted at this stage of the investigation, Apple was found to infringe one -- and that one is a FRAND-pledged standard-essential patent.

I'm sure both parties will appeal the parts of the ruling that are unfavorable to them. In statistical terms, Motorola was less successful with this preliminary ruling than with yesterday's initial determination on its complaint against Microsoft (holding four out of five patents violated), but in the words of one of Motorola's own expert reports filed with courts in the U.S. and in Germany, "it only takes one bullet to kill" when standard-essential patents are involved. And the patent that Judge Pender deems violated, U.S. Patent No. 6,246,697, was declared essential (by Motorola itself) to the 3G standard (UMTS, and in particular, its CDMA part). If both initial determinations on Motorola's complaints were turned into final rulings and resulted (which I don't think is going to happen in either case) in import bans, this one patent could be enough to prevent Apple from importing any iPhones and 3G-capable iPads into the United States.

But a major unknown is whether this would apply to new Apple products (starting with the iPhone 4S) incorporating a Qualcomm baseband chip: not only may Apple have a complete license-based (exhaustion) defense with respect to those products but it's also not a given that products with a Qualcomm chip technically infringe that patent. In fact, Motorola lost a lawsuit against Apple over the same patent in Germany because there was doubt that every implementation of 3G/UMTS would inevitably infringe. The Mannheim Regional Court found plausible ways in which infringement could be avoided. That, of course, would mean that the patent may not even be essential in a strict sense, but it's still a fact that Motorola made a FRAND licensing commitment.

At this stage I believe that Motorola won't actually get to prevent Apple from importing iPhones and 3G-capable iPads into the United States if Judge Pender's preliminary holdings became the final decision. Motorola will have to fight hard for a ruling of broader scope, and I'm sure it will.

With respect to the Qualcomm licensing situation, Apple brought an "antisuit lawsuit" in the Southern District of California. A hearing on whether or not that lawsuit survives a Motorola motion to dismiss it right away will be held on July 5, 2012.

Motorola's pursuit of injunctive relief, including but not limited to ITC import bans, against Apple and Microsoft based on standard-essential patents is being formally investigated by the European Commission. Now that Motorola has won two preliminary decisions over a total of four standard-essential patents (plus one non-standard-essential one) against two major U.S. companies, it also faces a considerable risk of an antitrust investigation in the United States.

If Google still goes forward with the acquisition of MMI, it will buy itself into those antitrust issues (and it has enough antitrust problems of its own to deal with already). But this is a bigger if than ever since the deal was announced. While the deal was cleared (despite thinly-veiled regulatory concern over Motorola's approach to the enforcement of standard-essential patents) by regulators in the U.S. and the EU, it is still awaiting clearance in China. Today Motorola's stock price is tanking because of profound concerns that Google might refuse to close the deal if China's Ministry of Commerce (MOFCOM), a rising star among the world's competition regulators for its thorough and self-confident approach, imposes remedies. There's no official information on what the issues in China are, but Wall Street is clearly very nervous.

Sometimes uncertainty is worse than definitive bad news, but in my opinion, it would make sense for Google to have second thoughts about the deal. To the extent that Motorola can cause serious problems to Apple and Microsoft, it does so with its standard-essential patents. It also has some reasonably interesting non-standard-esential patents harking back to the days of pagers, but those can be worked around and will expire in the not too distant future. Outside of standard-essential and pager-era patents, I haven't seen Motorola succeed so far with any of its other offensive claims against Apple and Microsoft.

If you'd like to be updated on the smartphone patent disputes and other intellectual property matters I cover, please subscribe to my RSS feed (in the right-hand column) and/or follow me on Twitter @FOSSpatents and Google+.

Share with other professionals via LinkedIn: