Tuesday, November 20, 2012

Apple and HTC fine with showing license agreement to Samsung -- but not the royalty rate

On Friday Samsung's counsel in the Apple case in California brought a motion to compel, demanding access to the newly-minted Apple-HTC license agreement that settled Apple's first Android patent case ever. Apple has just responded on Tuesday evening local time, and Apple's response is that Samsung's motion is "moot" because Apple and HTC are happy to provide a redacted version, with only 33 words (which set forth the license fees HTC has to pay under the agreement) being redacted. And even the redacted version will be marked as "Highly Confidential - Attorneys' Eyes Only". HTC originally wanted to limit access to a maximum of two outside attorneys, but Samsung proposed the aforementioned AEO designation, and Apple and HTC accepted this.

But Samsung's lawyers still want access to the full, unredacted agreement, including the part on the royalty rate. It's obvious that HTC does not want its competitors to know about its cost structures. While HTC CEO Peter Chou said in interviews that the amounts on which the media speculated ($6-$8 per unit) were "outrageous" and not true, the world will never know the amount unless the full agreement is disclosed at some point, which is very unlikely to happen.

Apple's motion says that Samsung "offers no reason [...] why the consideration amount is relevant to Apple's preliminary injunction motion". The word "preliminary" is an error in Apple's motion; at this stage it's about a permanent injunction. But anyway, a willingness to license can indicate that harm from infringement is not irreparable, which in turn has a bearing on injunctive relief. The court will now have to decide on the relevance of the license fee. I believe Samsung's lawyers simply want to know that fee regardless of its relevance to their fight against Apple's push for an injunction. I don't think the license fee is totally irrelevant, even in the injunctive-relief context, but the question is whether it's relevant enough (considering that even the willingness-to-license context as a whole is usually not given huge weight) to force Apple and, especially, HTC to disclose it.

An exhibit to Apple's filing contains correspondence between lawyers. Like in all other parts of its offensive case against Samsung, Apple is being represented on this one by the firm of Morrison & Foerster, who copied a Finnegan lawyer representing HTC in this context. Samsung brought in a new lawyer, Daryl M. Crone (founder of a smaller firm named Crone Hawxhurst), for its fight for access to the Apple-HTC agreement. This is because Quinn Emanuel, which is Samsung's lead counsel in this action, also represented HTC in its dispute with Apple and would now have to fight (as far as access to the agreement is concerned) against a company that was one of its clients less than two weeks ago. But Mr. Crone was an associate at Quinn Emanuel from October 2000 to June 2006, and the start page of his firm's website mentions that "[b]efore founding [Crone Hawxhurst], [Mr. Crone and his co-founder] practiced at two of the country's most prominent law firms--Quinn Emanuel and Simpson Thacher--where they worked alongside with and were trained by some of the country's best lawyers." This is as close to QE as it gets, without formally, under professional rules relating to conflicts of interest, being QE.

The curiosity that Samsung's lawyers show for the license fee is understandable. I, too, would like to know. But as I explained on Monday, the most important terms of this agreement will relate to restrictions, and some light on the existence and even the scope of restrictions may very well be shed at the December 6 hearing, if not in the build-up to it.

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