Five months after Judge Posner canceled an Apple v. Motorola Mobility patent infringement trial, the closely-related FRAND contract trial scheduled to begin on Monday (November 5) may suffer the same fate. In a very surprising "opinion and order" entered late on Friday, Judge Barbara Crabb reacted unfavorably to Apple's qualified willingness to enter into a patent license agreement. Apple had stated that it would take a license to Motorola's wireless (cellular and WiFi) SEPs on the basis of a court-determined FRAND royalty rate only if that rate does not exceed $1 per iPhone. In the event of the per-unit fee exceeding $1, Apple said it would exhaust all appeals and let the wholly-owned Google subsidiary continue with its SEP infringement actions.
Judge Crabb is not willing to order Motorola to make Apple an offer if the sole purpose of that offer may be to provide Apple with a bargaining chip. At a pretrial conference, Judge Crabb already expressed "concerns about determining a FRAND rate that may be used solely as a negotiating tool between the parties". She has meanwhile given this question further thought and now "believe[s] it would be inappropriate to grant Apple's clarified request for specific performance". While "[i]t may have been appropriate to order exceptional relief in this case if it would have prevented continued patent infringement litigation or protracted negotiations", "it is now clear that specific performance would not resolve those concerns".
Not only is Judge Crabb now unwilling to order Motorola to make Apple a licensing offer but she is now also "prepared to conclude that the court will not 'declare' a specific FRAND rate for Motorola’s standards-essential patents" and raises the question of "what purpose would be served by the court's declaring that Motorola's actions constituted a breach of its FRAND contracts".
Apple may have overplayed its hand here with a "heads I win, tails you lose" approach. If Apple had committed to a license agreement on court-ordered terms (possibly with some possibility of an appeals court adjusting the fee, but without any doubt about the conclusion of, and immediate performance of the obligations under, such an agreement), it really appeared that Judge Crabb wanted to help resolve this dispute for good.
In the somewhat similar FRAND contract case between Microsoft and Motorola that will go to trial on November 13 in Seattle, Judge James Robart also told the parties at a summary judgment hearing in June that, in his opinion, they were using his court "as a pawn in a global, industry-wide business negotiation". But that case is well on track, and Microsoft agreed to take a license on court-determined terms, so the court can bring about a definitive solution (apart from appeals). Motorola Mobility pointed Judge Crabb to Microsoft's commitment and said that Apple should at least make the same kind of commitment. Yesterday's order shows that Motorola has convinced Judge Crabb that Apple's refusal to do what Microsoft has done is unreasonable.
Now Judge Crabb is even wondering "whether a trial should be held regarding Apple's other claims". If Apple prevailed on its other claims, it would hold a declaration in its hand that might render Motorola's wireless SEPs unenforceable against Apple.
Apple and Motorola now have until noon (Central Time) on Sunday to respond to the order, and the judge will discuss these issues with counsel on Monday morning at 9 AM. The judge can't say whether she "will be able to make a final decision on Monday morning so the parties should be prepared to commence the trial at 1:00 after discussion of these issues". She notes that "it is unfortunate that these issues were not raised earlier in this case so that they could have been resolved before the eve of trial". The way I interpret the order, there are now three possibilities:
The concerns might be addressed satisfactorily, in which case the trial will go ahead as planned. If Apple dropped its reservation against any royalty rate exceeding $1 per unit, I believe it would still have a chance of resolving the FRAND licensing issue with Motorola at the upcoming trial. If Apple wants this trial to go forward, it must place enough faith in the court that a real solution can be put in place.
The trial might be called off on Monday morning, even though the parties have already made and are over the weekend continuing to make preparations for it.
If Judge Crabb is unsure even after the Sunday briefing and the Monday morning hearing, the trial will start on Monday at 1 PM but it could end abruptly after the judge concludes that Apple isn't entitled to the remedies it's seeking, or after the trial it might turn out that all the effort was made in vain. I'm sure that Judge Crabb doesn't want to waste court or party resources, so if her conclusion is that the trial shouldn't take place, I believe she'll stop the show on Tuesday at the latest.
Apple faces two challenges at this stage. It needs to address Judge Crabb's concerns at the legal level, but it also needs to avoid coming across as an arrogant litigant who is just trying to use the court system to its advantage, respecting only those decisions it totally agrees with.
Also on Friday, Apple brought a motion for reconsideration with respect to one of its motions in limine. In its motion for reconsideration, Apple makes an argument against Motorola's pursuit of injunctive relief over FRAND-pledged SEPs that is based upon the covenant of good faith and fair dealing. Apple presents some interesting Wisconsin case law related to that general principle of contract law. In its motion, Apple also points Judge Crabb to this report by Reuters' Diane Bartz on an FTC staff recommendation to bring an antitrust lawsuit against Google over Motorola Mobility's suspected abuse of SEPs.
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