Sunday, July 29, 2012

Apple stands ready to execute a FRAND license agreement with Google's Motorola Mobility

With a U.S. trial starting tomorrow (Monday, July 30), Apple's dispute with Samsung will likely dominate the headlines over the next several weeks, but from a strategic point of view, Apple's dispute with Motorola Mobility is even more important in light of that company's recent acquisition by Google, the maker of Android.

In late June, the ITC commenced a thorough review of an initial determination that recommended an import ban against various 3G-capable Apple products (all Apple 3G products prior to the iPhone 4S and iPad 4G). The parties first filed their answers to the Commission's questions, and then a responsive brief to each other's submission. The responsive filings entered the public record shortly before the weekend.

The most important disagreement between the two unsurprisingly relates to the fundamental question of whether the ITC should grant Motorola Mobility an import ban against Apple in the event that any standard-essential patent (SEP) is held infringed at the end of the investigation (the current target date for the final decision is August 23). Apple reiterates and further clarifies in a footnote its belief that exclusion orders should be available only under exceptional circumstances:

"In its opening submission, Apple recognized the possible exception of where a party ignored a prior court judgment setting a RAND royalty. Another possible exception is where a party is not subject to the jurisdiction of any U.S. court, requiring ITC intervention. Neither circumstance is present here."

But Google's Motorola Mobility wants to be entitled to injunctive relief (also against Microsoft in parallel lawsuits) unless a court or the ITC determines that it broke its FRAND pledge -- and Motorola also wants courts or the ITC to look at its counterparts' willingness or unwillingness to negotiate. In other words, unless someone negotiates under Motorola's preferred parameters (Hobson's choice, basically), he's an unwilling licensee, and that's an accusation that Apple refutes in its responsive brief (click on the image to enlarge or read the text below the image):

"Over the last few years, Apple consistently maintained its willingness to enter into a [F]RAND license and has sought to persuade Motorola to accept a [sic] [F]RAND terms. That Apple has refused to accede to Motorola's unfair demands does not make Apple an 'unwilling licensee.' Apple has concluded cross-licenses with many companies in the wireless industry, and stands ready to execute an agreement with Motorola if Motorola were to comply with [F]RAND."

I don't know -- and may never find out -- what was said in any discussions between Apple and Motorola over these past few years. Motorola argues that it has been trying to get Apple to take a license since the launch of the original iPhone in 2007. Apple now says that it "has sought to persuade Motorola to accept [FRAND terms]". Whatever happened between 2007 and now, Apple has now undoubtedly made a commitment to take a license and pay FRAND royalties for Motorola's SEPs.

While the words "stands ready" appear in the same sentence as Apple's reference to cross-license deals with other companies, this doesn't necessarily mean that Apple wants to include all of its non-SEPs in such a deal. In March, a European Commission document confirmed that Apple, according to its own representations, refused to grant Motorola a cross-license involving Apple's non-SEPs. Also, when Apple CEO Tim Cook spoke at the most recent edition of AllThingsD's D10 conference, he made a clear distinction between SEPs and non-SEPs, said he'd like to settle those assertions of SEPs against Apple, and stated that Apple "can't be the developer for the world".

A cross-license deal between Apple and Motorola Mobility may involve some or all of Apple's non-SEPs, but in connection with the ITC investigation of Motorola's complaint against Apple, all that matters is that Apple is not an unwilling licensee: it wants a license to Motorola's SEPs, but as long as Motorola demands a 2.25% royalty based on the entire market value of Apple's products, there won't be a deal.

I never doubted Apple's willingness to take SEP licenses on FRAND terms. I already said so in my recent analysis of a Dutch court ruling that Samsung is entitled to FRAND royalties and damages (though not to an injunction). But since Motorola has been claiming for some time that Apple wants to infringe rather than take a license, this clarification on Apple's part, in a publicly-accessible filing, is useful. Google (Motorola) now needs to go fishing for a new red herring.

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