Monday, November 5, 2012

Judge cancels trial, tosses Apple's FRAND lawsuit against Google's Motorola Mobility

Following a hearing in the morning, a federal judge in the Western District of Wisconsin has canceled an Apple v. Motorola Mobility trial that was scheduled to start today at 1 PM Central Time and has dismissed the entire case with prejudice, meaning that the only way Apple can salvage these claims is through an appeal (but not through refiling in another U.S. district court). Here's the minute entry that states the outcome (click on the image to enlarge):

The dismissal follows an eventful pre-trial week. On Tuesday, wholly-owned Google subsidiary Motorola Mobility brought a "motion for guidance" that essentially demanded that Apple commit to a license deal on court-determined terms. Motorola Mobility generally opposed the idea of the court setting a FRAND rate and ordering Motorola to make Apple an offer on that basis, but at least it wanted to ensure that Apple would also be bound by the court's determination, just like Microsoft had also committed, in a different case in another district, to a license deal. Until that initiative by Motorola, things were actually going very well for Apple, with the court being originally quite inclined to consider Apple's request for a court order that would have brought about a license agreement for Apple with respect to Motorola's wireless (cellular and WiFi) standard-essential patents. But when Apple took the position, in response to Motorola's motion, that it would only accept to be bound by the court's determination if the royalty doesn't exceed $1 per iPhone, Judge Barbara B. Crabb reacted negatively and started to wonder whether there was any point in having the FRAND trial that the court and the parties had already prepared for.

Yesterday, Motorola's lawyers sought to reinforce the court's skepticism while Apple justified its $1 position with the fact that Motorola might later refuse to pay a royalty to Apple, for its own wireless SEPs, based on the same methodology. Apple made two alternative proposals for the way forward: either Motorola could accept to be bound by the principles the court would establish in this case or Apple proposed to build an evidentiary record, over the next 6-9 months or so, and hold a trial setting a rate for a wireless SEP cross-license.

Apparently, Judge Crabb was not persuaded by Apple's last-minute proposal and determined that there was no case worth holding a trial.

I think Apple missed an opportunity to make important headway against Motorola Mobility. I don't know Judge Crabb and I didn't attend any of the hearings, but I read her orders and I really thought she was very solution-oriented. In fact, I thought she would have been a great judge to preside over a FRAND rate-setting trial -- a judge that I think an implementer of FRAND standards could really have trusted to arrive at a fair decision. As long as she considered Apple to be genuinely interested in a solution, as opposed to protracted litigation, she was definitely willing to help put an end to Motorola's wireless SEP assertions against Apple. But when she started to doubt Apple's intentions, the case fell apart.

Apple can and, I'm sure, will appeal this dismissal. In the meantime, Google, which owns and totally controls Motorola Mobility (Google employees sometimes appear at patent trials as Motorola corporate representatives), may come under pressure from the Federal Trade Commission, which may bring an antitrust lawsuit over the issue of SEP abuse. Also, Apple apparently felt that it had a very strong position because none of Motorola's SEP assertions in the U.S. has succeeded so far. I still believe Apple should have seized this opportunity to have an SEP license agreement put in place with Motorola Mobility.

This is already the second Apple v. Motorola Mobility U.S. trial to be canceled this year. In June, Judge Richard Posner, sitting by designation on the United States District Court for the Northern District of Illinois, also canceled a trial shortly before it was supposed to begin.

The Wisconsin situation has no bearing on the Microsoft v. Motorola Mobility FRAND contract trial scheduled to start in the Western District of Washington next week (on Tuesday, November 13, to be precise). While Apple raised similar issues as Microsoft did, and asked for similiar remedies, there are also some important differences concerning the history of negotiations and the parties' willingness to enter into a license agreement on court-determined terms. Microsoft really wants to put Motorola's SEP assertions against it to rest, while Apple apparently didn't believe that it needed a near-term solution. The Seattle trial will take place unless there's a settlement. There won't be a dismissal there.

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