Tuesday, November 6, 2012

IT industry readying for Federal Circuit fight over Judge Posner's FRAND ruling

Yesterday's dismissal of an Apple v. Motorola Mobility FRAND contract lawsuit in Wisconsin will be appealed, but a more important FRAND decision -- Judge Posner's ruling on the critical issue of injunctive relief, dismissing Motorola's related claims -- is already on appeal. That case is of fundamental importance to the industry. If Judge Posner's decision is affirmed, implementers of FRAND standards won't have to worry about standards-based sales bans on their products except under the most egregious of circumstances. But in the event the Federal Circuit substantially softens Judge Posner's stance that injunctions are pretty much irreconcilable with FRAND pledges, standard-essential patent (SEP) abusers will be invited to engage in hold-up tactics and will get to extort royalties at the threat of an injunction that will be unreasonable and, as a result of royalty stacking by multiple patent holders, pose a threat to the viability of many products (and even entire companies).

It's disappointing that Google, which micromanages Motorola Mobility's patent litigations, decided to appeal the best part of Judge Posner's ruling. It's worse than disappointing. It's a clear violation of the Don't Be Evil rule. It's like suggesting that the end of world domination by Google, which dreams of becoming within a matter of years the undisputed market leader in operating systems, justifies the means of industry-wide devastation.

With so much at stake for third parties, the appeals court is sure to receive input from many key stakeholders. The issue of FRAND-based sales bans already drew submissions from politicians, competition regulators, industry players and trade associations when it appeared that it would be outcome-determinative in the ITC investigations of Motorola's complaints against Apple and Microsoft.

Apple brought a motion yesterday to set a briefing schedule for the amici curiae, the third parties who will state their position to the court. At the beginning of its motion, Apple notes that "[v]arious parties are exclusively interested in the district court's ruling that Motorola Inc. ('Motorola') cannot obtain an injunction on patents that Motorola committed to license on Fair and Reasonable and Non- Discriminatory ('FRAND') terms". Without a doubt, this will be the key transcendental issue. The part of Judge Posner's ruling relating to Apple's patents was mostly specific to just those specific patents and the procedural history of the case, though we may also see some amicus briefs relating to the question of whether a plaintiff should lose his entitlement to any relief (monetary and injunctive) if its damages theory doesn't survive a Daubert process, without any chance for a do-over of the dismissed expert report.

For the vast majority of amici curiae, who will focus on the FRAND injunction question, there's an unfortunate lack of clarity in the federal rules of procedure concerning amicus brief submissions in consolidated cases. The Federal Circuit consolidated Apple's appeal of the non-FRAND part of Judge Posner's ruling and Google's (Motorola's) appeal of the FRAND part into one, with Apple's appeal (as it was the original plaintiff) being the "lead appeal" and Motorola's appeal being the "cross appeal". But for the all-important FRAND part of Judge Posner's ruling, Motorola is the appellant and Apple the appellee who will defend Judge Posner's position. As a result, Apple won't raise the FRAND issue in its opening brief, which is due on or before December 4, 2012, but if one interprets the procedural rules literally, the amici curiae who, like Apple, support Judge Posner, would have to file their briefs seven days later, before any party would have taken a position on the issue in this appeals process. Based on the current schedule, Motorola's brief, which will attack Judge Posner's position, will be due no later than March 20, 2013 -- more than three months after the literal deadline for amici curiae supporting Judge Posner and Apple, and approximately five months before Apple will firstly comment on the FRAND part of the ruling in a responsive pleading due in early May 2013.

This sequence of events would be as nonsensical as it would be prejudicial to the pro-Posner camp. Motorola and its third-party supporters of FRAND abuse would get to file their submissions after having seen all of the submissions in support of Apple's position, even though Motorola is the de facto appellant with respect to the FRAND issues. Apple therefore proposes that Motorola's supporters file their briefs within the usual seven-day period following the brief in which Motorola will attack Judge Posner's FRAND ruling, and that Judge Posner's supporters file their briefs after Apple's responsive pleading. This is simply the order in which the filings would undoubtedly be made if this were only an appeal of the FRAND part.

I believe Apple's motion is well-reasoned and that it's in the appeals court's interest to clarify that the schedule for FRAND-related amicus briefs will be the same as if only the FRAND part had been appealed. Should the appeals court disagree with Apple, all supporters of Judge Posner's stance on FRAND have only about five weeks from today to submit their amicu curiae briefs. Apple's scheduling motion is an "expedited" one. Motorola will oppose it, but hopefully the court will provide clarification in the very short term.

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