Wednesday, June 20, 2012

Google wants the ITC to deny import bans more often -- except when Motorola pursues them

This month, the ITC received a number of statements on the public interest in connection with Motorola's pursuit of import bans against Apple and Microsoft. In fact, I heard today that six Republican senators, led by Senators Herb Kohl (Chairman of the Subcommittee on Antitrust, Competition Policy and Consumer Rights) and Mike Lee (Ranking Member of the same subcommittee), also sent the ITC a letter to express concern about exclusion orders involving standard-essential patents. I'll probably report on that letter once I have obtained a copy. [Update] reports that Director Kappos, the head of the United States Patent and Trademark Office, warned against the "tremendously negative effects" of import bans over standard-essential patents at a Senate hearing. [/Update]

I've known all along that Motorola Mobility's parent company, Google, filed comments on the public interest in support of Android device makers such as HTC. Basically, Google argued that Android must have a free pass for patent infringement because it's "open". That openness is certainly not reflected by what HTC just told the ITC about having no access at all to the source code of the GMail client, a mandatory part of Android under Google's licensing regime. Whether or not Google's arguments made sense, it's understandable that it supports Android device makers. Now I have found out that Google's import-ban-skeptical advocacy efforts go well beyond those investigations in which Android's infringement is at issue.

These days I focus on IP disputes between major operating companies in the mobile devices industry. I don't have time to look at too many other issues and cases. That's why I didn't previously see Google's filing (which was made on November 15, 2011). A couple of days ago, the (unofficial but pretty good) ITCblog reported on a public interest submission Google made in an investigation of a complaint by a small entity named ChriMar (a company that has a very small product business but high hopes to build a large patent licensing operation) against Cisco, HP, 3com and others. (Cisco and HP are against import bans over standard-essential patents and restated their long-standing views in submissions concerning Motorola's ITC cases.) The patents that ChriMar is asserting are related to Power over Ethernet. I don't know whether they are (alleged to be) standard-essential, but at the very least they are related to that standard (IEEE 802.3). If I hadn't read about this case on the ITCblog, I would never have looked at it. But I was quite amazed to find out about Google's argument because some of the key points Google made in that context last November could also be held against its subsidiary Motorola Mobility's pursuit of injunctive relief -- and against Samsung, too.

ChriMar didn't like Google's statement and claimed that the ITC would either have to allow some very far-reaching discovery of Google or throw out Google's statement. The judge did neither. In the dispute over whether Google's statement should be admitted, Google was, quite interestingly, represented by Quinn Emanuel, the firm that also represents Motorola Mobility and Samsung.

There's nothing in Google's statement, or in its defense of that statement and its refusal to make witnesses and documents available, that indicates a particular interest on Google's part in Power over Ethernet. It appears that Google primarily thought that the collective market share of the defendants in this investigation in the relevant market (allegedly 86%) created an opportunity to argue that the ITC should not ban products at the request of a patent holder who neither has a large enough product business to provide alternatives to the market nor has licensees who could do so. I guess Google was hoping that a precedent of import bans being denied based on such an asymmetry of market shares between a complainant and the defendants would help in scenarios in which Apple or another patent holder asserts patents against multiple Android device makers at the same time or in subsequent investigations.

In the first part of its statement, Google argues, citing a Senate report, that the public interest "must be the 'overriding consideration[]' in the Commission's decision on whether to issue an exclusion order". Quoting a Federal Circuit opinion, Google reminds the ITC of the fact that it is "fundamentally a trade forum, not an intellectual property forum".

It then wants the ITC to place "great emphasis" on the question of alternative offerings: "Issuing an exclusion order when firms other than the respondents cannot meet demand only harms consumers and competitive conditions in the United States without providing any countervailing benefit of protecting a viable domestic industry."

I'm sure Google would like the public interest to be of no importance when its own subsidiary Motorola Mobility is the complainant. While it's normal that companies will always say what's best for them in a given dispute, this situation is different because we're talking about public interest issues -- this is a matter of policy, and inconsistencies are problematic at that level even though they are not at the level of, for example, legal arguments over damages or claim construction.

In the second part of its letter, Google stresses the insignificance of ChriMar and its only disclosed licensee, an entity named Hubbell, in the relevant market:

"Similarly, ChriMar's only disclosed licensee, Hubbell, Inc., makes just one line of 'PowerTrac products,' which appear to be power-over-Ethernet enabled switches. [...] Hubbell does not make the full range of accused products, and it has a small share of the market for the switches it does make -- a fraction of the 14% of the market not sold by the proposed respondents."

No matter how tiny ChriMar's and Hubbell's aggregate market share in the market for PoE switches may be, it must be infinitely greater than Google's (Motorola's) gaming console market share.

Google asks the ITC for "serious investigation and consideration" of this kind of argument -- I'm sure that's what Apple and Microsoft would also like to see happen in the cases that concern them.

In the third section of its statement, Google accurately notes that "[s]ome non-practicing entities and patent speculators have turned to the ITC in an effort to maintain that leverage and make an end-run around the Supreme Court decision in eBay Inc. v. MercExchange LLC, 547 U.S. 388 (2006)", a ruling that has made it considerably harder to win injunctions in federal court. When it comes to gaming consoles, Google (Motorola) is also a non-practicing entity. And it's not just NPEs and "patent speculators" that turn to the ITC for the purpose of an end-run around the significant hurdles for injunctive relief in federal court: certain holders of standard-essential patents are playing the same game for the same reason.

There's no problem with Google's statement on the public interest in that particular investigation. I think Google makes a number of valid points in that one. The problem is that Google's actions -- let's not forget that Mountain View is now in complete control of Motorola Mobility's litigations -- are inconsistent with its words. Google should resolve this contradiction by acting in accordance with its own argument in the Power-over-Ethernet case, and it should encourage its number one hardware partner, Samsung, to do so as well. I'm sure that antitrust regulators in different jurisdictions would welcome this.

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