Tuesday, December 4, 2012

Apple tells court it 'has a general policy against licensing its inventions, particularly to competitors'

In July, Apple and wholly-owned Google subsidiary Motorola Mobility gave notice of their appeals to the Federal Circuit of different parts of Judge Posner's dismissal of one of their two-way lawsuits. Google (Motorola) is fighting Judge Posner's denial of injunctive relief over FRAND-pledged standard-essential patents for high-level reasons while Apple's appeal is much more case-specific: it's pushing for an injunction (and, as a lower priority, damages) based on three of the 12 patents that used to be at issue in this case.

Apple and Google agreed on an extension of time for their pleadings, which the appeals court granted. While this is a cross-appeal of a two-way lawsuit, Apple is formally the appellant and Motorola the cross-appellant. Apple had to file its opening brief last week, but I obtained a copy of the public redacted version of that brief only today. It's really a very interesting document and I may also talk in other posts about the issues it raises. In this post, however, I'll focus on only the question of Apple's willingness to extend licenses to competitors. This would be a highly interesting topic at any point in time, but it's even more relevant with a view to the discussion of the Apple-HTC settlement at the Apple v. Samsung injunction hearing that will take place the day after tomorrow.

These are Apple's three patents on appeal in the "Posner case":

  • U.S. Patent No. 7,479,949 (touchscreen heuristics, i.e., distinguishing vertical, horizontal and diagonal movements based on initial angle of gesture; first named inventor: Steve Jobs; also asserted against Samsung at the ITC)

  • U.S. Patent No. 5,946,647 ("data tapping"; identifying phone numbers and other data types in emails and other text documents and linking them to actions; Apple won an import ban over this patent against HTC and is asserting it against Samsung in the second California litigation)

  • U.S. Patent No. 6,343,263 (real-time signal processing; an Administrative Law Judge at the ITC held HTC to infringe it but this part of his preliminary ruling was reversed)

The overlaps between Apple's ITC complaint against HTC and the patents asserted in the Posner case are no coincidence. In October 2010 Motorola had brought declaratory judgment claims against many of the patents Apple was already asserting against HTC, and Apple then brought offensive counterclaims over those patents, which came to life in Wisconsin but ended up being adjudged in Chicago.

Apple's brief mentions the settlements with Nokia in June 2011 (Apple was asserting the '263 patent against Nokia, too) and HTC in November 2012. But as long as there's no settlement with Google (Motorola), Apple wants an injunction, and its opening brief in this appeal denies that Apple's patents in general, and the three patents-on-appeal in particular, are broadly licensed.

The brief repeatedly refers to Apple's "general policy" concerning patent licensing, and that's because of a 2008 ruling by the same appeals court that referred, as a factor weighing in favor of injunctive relief, to "Broadcom’s general policy of not licensing its patents and the harm that would ensue from a compulsory license to its most significant competitor". Here are Apple's statements on its own "general policy", in the order in which they appear in the pleading:

  • "Apple, which has a general policy against licensing its patents, presented evidence that Motorola was cutting into Apple's market share and diverting goodwill."

  • "Apple has a general policy of not licensing its inventions to anyone else."

  • "Apple presented evidence that it has a general policy of not licensing these patents."

  • "And unlike Motorola, which pre-committed to license its patents, Apple made no such commitment as to the patents at issue here and presented ample evidence that it has a general policy against licensing its valuable technology to Motorola or anyone else."

  • "First, Apple has a general policy against licensing its inventions, particularly to competitors. Second, Motorola's unlicensed copying of the inventions will continue to erode Apple's market share and consumer loyalty."

  • "Apple seeks an injunction to stop infringement by an ardent competitor. Apple had a general policy against licensing its central technology. It had proof that it is losing market share and goodwill because of the ongoing infringement. None of its asserted patents are standard-essential."

Apple's brief emphasizes the objective of having distinctive products as a reason for Apple to generally withhold licenses:

  • "Its business model famously depends on distinctive products that stand apart from the masses."

  • "Apple has a policy against licensing competitors to practice the three patents. Apple is innovative to the core. Its business model is all about distinguishing its products from the competition's. [...] This business model of distinctive innovation does not work if competitors are free to make their products identical. That is why Apple has a policy against licensing [redacted]."

  • "In any event, Apple's success is based on its patented inventions. Nothing will undermine its success like a ruling that competitors are free to copy its innovations as long as they are willing to pay a royalty."

Judge Posner's dismissal of Apple's claims against Motorola (and of Motorola's SEP assertions against Apple) occurred almost six months before the Apple-HTC deal, but this appellate brief was filed after the HTC settlement and mentions it. When the terms of the Apple-HTC deal, especially the patents it covers, are discussed in court on Thursday, there may be some more clarity about how Apple structures such license deals and which limitations, exceptions and carve-outs, if any, it actually imposes.

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