Since Friday evening there has been a lot of discussion on the Internet about an AllThingsD article entitled "Google Says Some Apple Inventions Are So Great They Ought to Be Shared". The article and the two letters (one from Google to the United States Senate Judiciary Committee, and a rebuttal letter from Apple) it refers to are definitely worth reading.
Google is well aware of widespread concern over the import bans and other injunctions that Google subsidiary Motorola Mobility, Samsung and other players are seeking based on standard-essential patents (SEPs). For the concerns that have been expressed, let me refer you to four recent blog posts:
In an effort to excuse its own conduct, Google's letter argues that some or all of the issues raised in connection with SEPs also apply to what Google calls "commercially essential" patents. While Google's letter doesn't say specifically that a patent like Apple's "overscroll bounce" and other multi-touch patents would be included, the term "commercially essential" is broad and vague enough to potentially include such technologies. Google talks about "interoperability" in this context, but "interoperability" is also a term "à géometrie variable": different stakeholders use it for different purposes. A very broad definition of interoperability would include user interface concepts.
The key point Google tried to stress in its letter to the Senate can be paraphrased like this: "look, standard-essentiality is not a binary question, there are many different shades of gray."
But the distinction between SEPs and non-SEPs is binary when the question is whether or not injunctive relief should be available for a category of patents. While I agree that non-SEPs vary greatly in strength, ranging from patents that can be worked around with a negligible investment to patents that are essential to interoperability with market-leading products, it still makes sense to categorically oppose injunctive relief over SEPs (since those who made a promise to license their patents on FRAND terms must honor it, as Judge Posner also decided) and to look at "essentiality" issues of other patents only on a case-by-case basis. Very few non-SEPs raise antitrust issues -- but all SEPs do, since the standard-setting process itself is exclusionary in an anticompetitive sense (let's not forget that standard-setting consortia are typically cartels of major industry players) unless FRAND commitments are made and honored.
By pointing to the fact that not all non-SEPs are free from competition issues (actually, there could also be antitrust issues in connection with Google's search engine patents such as the one on PageRank), Google cannot explain away the fact that all SEPs pose a major threat if companies obtain injunctions based on them. The two categories of patents must not be lumped together.
The letter Google sent to the Senate Judiciary Committee's leadership is not the only recent document in which it sought to blur the distinction between SEPs and non-SEPs. Last Friday, a Google filing with the ITC became discoverable. It's Google's response to the questions the ITC asked in connection with its review of a preliminary finding that Apple infringes a 3G-essential patent held by wholly-owned Google subsidiary Motorola Mobility.
One of the ITC's questions relates to switching costs:
"Question 4: With regard to the '697 and '223 patents, are there substantial costs and delays associated with switching away from the standardized technology in question?"
Here's the first paragraph of Google's reply:
"While there may exist costs or delays associated with switching away from Motorola's standardized technology, the same is true of switching away from any patented technology. Indeed, many patents are de facto standards where a patent owner, often a market leader at the time, encourages industry-wide adoption of its technology in contexts raising interoperability concerns. The economic analysis is the same to that described by the FTC with regard to patents made essential by a formal standards setting process. This is why the facts of each case should be analyzed."
That paragraph contains two major factual inaccuracies and one wrong conclusion:
It's not just that "costs or delays" could be associated with switching away from standards like 3G or IEEE 802.11 (WiFi, or WLAN) -- it's simply a total non-option for a single company like Apple. A lot of existing network infrastructure would have to be replaced. The costs are absolutely prohibitive, and it would take many years.
It's not true that "many" patents relate to de facto standards created by a single major player. There are some such patents, but they are few and far between.
The final sentence demands that "the facts of each case should be analyzed". But with SEPs -- and especially with a FRAND promise in place -- some of the analysis that Google proposes isn't necessary. It's clear that monetary compensation is all that a FRAND patent holder can expect. Only because injunctions may be inappropriate in some non-SEP cases, they aren't necessarily appropriate in some SEP cases where the implementer is identifiable, can be sued in federal court, and doesn't refuse to pay a court-determined royalty rate. The problem in this case is only that Motorola has been making excessive demands for years.
Other passages of Google's (Motorola's) filing with the ITC also compare cases involving non-SEPs to cases involving SEPs as if no bright-line distinction could be made. Here's one example:
"Indeed, in Investigation No. 710, also directed to smartphones, the Commission rejected arguments -- including those made by Google Inc, now Motorola's parent company -- concerning the public interest for these products, and the Commission issued an exclusion order against HTC. The Commission should be consistent in this regard, and find that Apple's products do not represent the sort of overriding public interest that avoids the statutory remedy. Indeed, unlike the products at issue in Investigation 710, Apple's products are not based on open source operating system that anyone can access, and so the public impact is lesser in Apple's case."
The import ban against HTC is based on Apple's non-standard-essential "data tapping" patent. In the headline of my blog post on that decision, I said that it was a "ruling of narrow technical scope". HTC's CEO said a day or two later that the patent covered a little-used feature that HTC could remove. The ITC is now investigating an enforcement complaint that Apple brought because it believed that HTC's new products still infringe that patent. The ITC denied emergency action (i.e., an immediate import ban against HTC's new devices) because there's a genuine dispute over whether or not HTC still infringes. All of this shows that Apple's patent does not have the power to shut HTC out of the U.S. market -- but Motorola's 3G-essential patent that an ITC judge held infringed would affect all of the accused products (which do not include the iPhone 4S and iPad 4G because Motorola, for purely tactical reasons, wanted to steer clear of patent exhaustion issues relating to a license agreement it has with Qualcomm).
Google's attempts to conflate the issues even include design patents. In its ITC filing, Google also says this:
"Apple itself routinely seeks injunctions against its competitors, such as Samsung recently. See Apple, Inc. v. Samsung Electronics Co., Case No. 5:11-cv-01846, Order of June 26, 2012, D.I. 1135 ('Although Samsung has a right to compete, it does not have a right to compete unfairly, by flooding the market with infringing products. As explained by the Federal Circuit, '[a]lthough the public interest inquiry is not necessarily or always bound to the likelihood of success o[n] the merits . . . absent any other relevant concerns . . . the public is best served by enforcing patents that are likely valid and infringed.' Abbot Labs. v. Andrx Pharm., Inc., 452 F.3d 1331, 1348 (Fed. Cir. 2006). . . . As a patent holder, Apple has a valid right to exclude others from practicing Apple's invention. In order to protect that right, and promote 'the encouragement of investment-based risk,' the public interest weighs in favor of Apple.'); Apple, Inc. v. Samsung Electronics Co., Case No. 5:12-cv-00630, Order of June 29, 2012, D.I. 221 at 99 (same). Apple's arguments in those cases – that remedies for patent infringement are necessary to protect the patent system – hold true when applied to Apple."
By adopting (in the final sentence) Apple's arguments for its own purposes against Apple, Google basically throws Samsung under the bus. But the fundamental problem with the quote from the Apple-Samsung case is that it's a quote from the order of a preliminary injunction against the Galaxy Tab 10.1 because of Samsung's identified infringement of a design patent. With non-standard-essential technical patents, Google can argue that some of them (though its use of "many" blows things out of proportion) raise competition issues. With design patents, that's never the case, by definition: elements that are dictated by functional requirements cannot be claimed by design patents.
Comparing Motorola's enforcement of wireless-essential patents against Apple to Apple's own enforcement of a narrow "data tapping" patent against HTC didn't make sense, but comparing the enforcement of wireless-essential patents to an injunction over a design patent is completely absurd. In fact, Motorola's own Xoom tablet, which a German court just cleared of violation of one of Apple's design-related rights, proves that it's definitely possible to design tablet computers without infringing on Apple's design-related rights. Samsung wanted its products to look very much like Apple's, and courts in different jurisdictions made different decisions on whether this constituted an infringement of Apple's rights. To the extent that injunctions came down, Samsung has no one to blame but itself. Apple's assertion of design-related rights is not by any stretch of the imagination comparable to Motorola's pursuit of injunctions based on wireless-essential patents.
If Google wanted to make an intellectually-honest case against Apple's or anyone else's enforcement of non-SEPs, the first step would have to be that it immediately ceases its pursuit and enforcement of injunctions in the United States, Germany and possibly other jurisdictions over FRAND-pledged SEPs. In a second step, Google could then credibly raise competition issues involving non-SEPs to the extent that there are real issues (and not just imaginary or hypothetical ones). But Google doesn't want to solve these problems step by step. Google apparently thinks that the bigger the problem is (because of its own lawsuits) or the bigger it makes the problem appear to decision-makers (through its letters and filings), the more likely it will be to get a resolution that favors its Android-related business interests.
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