Friday, November 16, 2012

Samsung's lawyers want Apple to show the HTC deal -- implications for irreparable harm

On Friday afternoon Pacific Time, Samsung's counsel in the dispute with Apple, the law firm of Quinn Emanuel, brought a motion asking for access, for the purposes of evaluating Apple's claim that it will suffer irreparable harm in the absence of a permanent injunction, to the ten-year license agreement Apple and HTC announced last weekend. In my report on the settlement I felt that "[f]or Samsung this Apple-HTC deal probably comes too late to leverage it at the December 6 hearing in formal terms" -- note the word "probably".

Willingness to license certain patents can play a role in an injunctive relief analysis, though I believe its psychological impact outweighs its legal relevance. U.S. courts understand pretty well that a simple rule according to which injunctions are much less likely to be available based on patents that have been licensed would discourage settlements and license deals. Willingness to license plays a far greater role if a FRAND licensing promise has been made in public than if someone received a license under a private deal that may have been struck under special circumstances.

Time isn't on Samsung's side either. It's quite possible that Apple purposely delayed the HTC deal until a point at which it was reasonably comfortable that it wouldn't undermine its chances for a post-trial injunction in the strategically far more important Samsung case.

But Samsung's legal team at least has a duty to try to get some mileage out of the Apple-HTC deal. Avoiding an injunction is Samsung's #1 priority for the December 6 hearing, with all other objectives following at quite a distance. Some of the other issues are actually just about preserving the record for an appeal.

One side effect of this discovery effort could also be that some information about the structure of the HTC deal comes to light that would otherwise be sealed for the foreseeable future. Even the worst-case scenario for Samsung, which is that the patents at issue in the Samsung case aren't licensed to HTC (or maybe there is some kind of license or covenant not to sue, but with restrictions attached), wouldn't weaken Samsung's position too much. It would merely affirm what Apple has claimed, but proving that Apple has softened its stance could really make Judge Koh wonder about whether Apple really needs injunctive relief. I believe Apple does need it -- I'm merely talking about what the judge might think, depending on the substance of the Apple-HTC agreement. At the very least the settlement involves the withdrawal of pending U.S. litigation over some of the same multitouch patents, such as the ITC investigation of Apple's second complaint against Samsung, in which a preliminary ruling would have been due the week after next.

The biggest question to me is whether Samsung's counsel already knows all or many of the terms on which Apple and HTC agreed, and is already convinced that the presentation of that agreement to the court will be very helpful. This is somewhat speculative but not baseless: Quinn Emanuel also served as counsel to HTC in its dispute with Apple. In some cases, local law firms (such as in Delaware) had the formal lead, but there can be no doubt that Quinn Emanuel, which calls itself a "litigation powerhouse", had the strategic lead.

A firm's representation of a client in litigation doesn't necessarily mean that it gets to see the terms of a settlement. In this case, there would have been an obvious resaon for HTC to withhold at least some of the information Quinn Emanuel, given that QE also serves as counsel to Google (including its wholly-owned Motorola Mobility subsidiary) and to Samsung, and it presumably owes a lot more business to Google, directly and indirectly, than to HTC. I can't imagine that Google was happy (no matter what it might say in public or in private) that HTC, two and a half years after being the first OEM (of many by now) to validate Microsoft's Android patent licensing program, would once again become an early adopter of a patent license from a major Google rival. HTC did the right thing and there's no betrayal involved: it had to take care of itself, considering that after all these years and the $12.5 billion Motorola Mobility deal, Google had continiuously failed to protect Android to the extent that Apple would have extented a blanket license to Google and its entire ecosystem. So there was a situation in which HTC might have felt that someone else had less of a potential conflict of interest -- though I have no doubt about the integrity of QE's lawyers and their commitment to HTC -- when striking a deal with Apple that was presumably tantamount to a surrender on relatively sweet terms (compared to what might have hapened if litigation had continued for a couple more years).

Also, large firms sometimes put up a Chinese Wall inside the organization if they serve multiple clients on related issues if, when and where there might be a conflict of interests, even if only a partial one, such as HTC's interest in avoiding that competitors know about its licensing costs, which are a key competitive factor. So even if QE as a firm knows the details of the Apple-HTC deal, the Samsung litigation team might lack that information and needs to obtain it through discovery, if Judge Koh and Magistrate Judge Grewal grant it at this late stage, less than three weeks prior to the December 6 injunction hearing. Samsung will also try to win access to the deal terms for at least some of its inhouse lawyers, enabling them to discuss this matter with their outside litigators.

I would obviously like the idea of a partial disclosure of the Apple-HTC deal terms as a result of Samsung's initiative, just out of curiosity, but Apple, whose counsel didn't reach an agreement with Samsung's litigators on this matter, may have some very legitimate reasons for opposing this discovery, especially at this stage.

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