Friday, June 22, 2012

Microsoft is enforcing a German injunction against Motorola -- FAT patent trial held in Mannheim

Google's (Motorola's) PR stunt styled as a "settlement" proposal to Microsoft related to the parties' ITC cases, but there's another jurisdiction in which Google will sooner or later have to work out a solution: Germany.

Today the Mannheim Regional Court held a trial on a Microsoft lawsuit against Motorola over EP0618540, the European manifestation of its FAT (File Allocation Table) patent, one of the most famous patents in this industry. A ruling or an order to stay will be handed down on July 27. This could go either way, and I'll talk about this case further below.

During the course of today's trial, Motorola's counsel, Dr. Marcus Grosch, mentioned in the context of enforcement that Microsoft is presently enforcing a German injunction against his client while Motorola cannot enforce its own German injunction due to a U.S. court decision.

On May 24, the Munich I Regional Court granted Microsoft a permanent (and provisionally-enforceable) injunction against Google's Motorola over a patent on a multi-part SMS (text messaging) layer. In order to enforce it, Microsoft had to provide a 25 million euro bond or deposit. For these amounts, companies typically make deposits. The good news for German taxpayers is that Bavaria, the German federal state in which the lawsuit was (and all related enforcement actions must be) brought, does not pay interest on such deposits, while Motorola's enforcement against Apple costs millions of euros per year.

It comes as no surprise that Microsoft wants Motorola to comply with the Munich injunction. Microsoft officials have been saying for two years that companies building Android devices must license patents. Google denied this for a long time, but no longer does. While Google chairman and former CEO Eric Schmidt said in Taiwan last November that Google's leaders "disagree with Microsoft that anyone needs to pay Microsoft a royalty fee for [Android and Chrome]", the "settlement proposal" that Motorola made this week also envisioned royalty payments to Microsoft.

Google also appears to backtrack from last summer's claims that its acquisition of Motorola Mobility was going to be a solution to Android's patent worries. At this week's shareholder meeting, investors rightfully questioned the rationale behind the $12.5 billion deal, which was not only costly but brings down the company's margins and has disenfranchised some of Google's key OEMs such as Samsung and HTC, who are now more than ever interested in alternative platforms. Since Motorola has, at least so far, not given Google any meaningful leverage against Apple, Microsoft or anyone else, Mr. Schmidt has no results to show and now says the deal was "not all about the patents".

In the meantime, more and more patent assertions against Android come to judgment. Gooogle and its partners can fend off most of them -- that's the nature of (software) patent litigation, which is a low-scoring game, kind of like baseball or soccer. And it takes time. But Android is found to infringe a growing number of patents, while the Android camp tries to solve the problem with standard-essential patents, which are simply not supposed to be used as strategic weapons.

The FAT patent case that went to trial today is one of many Android infringement cases. Like I said above, the outcome is not predictable. Listening to the court's explanations and the parties' arguments, I felt that Microsoft does have more than a 50% chance of winning the infringement part, and also a chance of more than 50% of overcoming Motorola's invalidity argument since infringement and validity cases are bifurcated in Germany and infringement courts stay their proceedings only if there's a high probability of invalidity. In this case, the German Federal Court of Justice upheld the patent two years ago, while the ITC doubted its validity. But the ITC based its reasoning on a theory involving two mailing list posts, one by Linus Torvalds and another one by a lesser-known programmer. The ITC believed that the FAT patent was obvious over such combination of prior art references. In Germany, infringement courts rarely stay proceedings based on such theories. And in my observation, even U.S. courts don't attach much importance to an invalidity or infringement analysis by an ITC judge. For example, Judge Posner threw out certain references to the ITC's findings relating to on an Apple patent.

It's relatively unusual in Germany that an infringement action is brought over a patent after it was upheld by the Federal Court of Justice. Most of the time, someone sues over a patent, the defendant starts a nullity action, and it then takes years to get to the Federal Court of Justice. But in this case, the patented technique has been considered inventive. The Federal Court of Justice didn't have those mailing list posts before him, but a patent that has survived such a challenge is considered rather strong by the infringement courts.

Google/Motorola argued today that paragraph 49 of the opinion of the Federal Court of Justice described as the inventive element of this patent that directory entries of long file names are marked in a way that makes them invisible for older operating systems that can only handle shorter file names. According to Google/Motorola, those mailing list posts render this supposedly-inventive element non-novel. But even if one agreed with Google/Motorola on that part, the challenge here would still be that there is no non-novelty argument for the FAT patent as a whole: it all comes down to obviousness over a combination of prior art, and Motorola appears to propose that the court consider the patent obvious over the combination of those mailing list posts and whatever prior art the Federal Court of Justice analyzed. In Germany, theories of obviousness over combinations of prior art require a showing similar to the TSM (teaching-suggestion-motivation) test.

Motorola's counsel stated that he's a big believer in bifurcation. I'm not. I would actually prefer Germany to allow a full invalidity defense in its infringement proceedings, with a standard comparable to preponderance. But that's what lawmakers will have to decide, if they ever will. Where things stand today, Microsoft is entitled to receiving the same treatment of its own patents as everyone else. Motorola also asserts mostly older patents, particularly in Germany, and wants the infringement courts to grant injunctions well in time before those patents expire. Now it may just have to live with bifurcation as a defendant. Come July 27, we'll know. The fact that the court set a target date only five weeks after trial (usually it's two months or more) shows that the judges are aware of the sense of urgency for a patent that will expire in early 2014.

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