A few hours ago Samsung filed a less-redacted version of the Apple-HTC settlement and license agreement. AllThingsD and CNET have published it. Two weeks ago I reported on a much more heavily-redacted version of the agreement and subsequently clarified that Google's loan patents were treated differently.
Samsung made this filing on Wednesday afternoon with a view to an injunction hearing scheduled to take place in San Jose, California later today, where Samsung will argue that Apple's willingness to license its patents should weigh against its claims of irreparable harm from continued infringement and that monetary compensation would be sufficient to make Apple whole. That's why I'll focus in this post on the scope of the agreement.
Samsung cannot and presumably will not try to argue that Apple is willing to license its design patents. Those are explicitly excluded from the agreement in a way that leaves no doubt whatsoever. Apple and HTC never had a design patent dispute. Apple's design patent assertions have so far targeted mostly Samsung (in multiple jurisdictions), in one German case Motorola's XOOM tablet (Apple lost that one but may still be pursuing an appeal), and a few smaller players in Germany, Spain and possibly other jurisdictions. Should HTC suddenly build iPhone and iPad lookalikes, Apple could still sue, but I doubt that this will be necessary.
But in the context of a potential permanent injunction against Samsung and its strategic implications, Apple's asserted multi-touch patents were always going to be the more important ones. There's no way that one can truly analyze the impact of an injunction without looking into the question of workarounds (which aren't available if patents are truly standard-essential, but that's not the case here). I discussed the limited information Samsung provided on its workarounds for the three "California trial" multi-touch patents. The rubber-banding ('381) patent can't be worked around without losing its key benefit, but it obviously doesn't cover other (inferior) forms of scrolling on a multi-touch device, such as the "blue glow". For tap-to-zoom it appears that infringement of the '163 patent can be avoided without any significant impact on usability. An injunction over this patent would be next to meaningless apart from a purely symbolical significance. The tricky part is the pinch-to-zoom API ('915) patent. As I predicted, Apple is disputing that Samsung's purported workaround steers clear of infringement.
All of those patents are undoubtedly covered by the Apple-HTC license agreement, but that agreement comes with an anti-cloning provision. I've been saying for a long time that at a minimum Apple needs to defend the distinguishability of its products, or its business would be subjected to totally unfettered, margin-destroying commoditization. The Apple-HTC agreement defines a very important term: Distinctive Apple User Experience. That's what Apple seeks to protect and that's something that is not for sale. The first time that an anti-cloning provision in an Apple license agreement was mentioned in public was this summer when an Apple executive testified in open court that Microsoft has a license to all Apple patents but that the parties agreed to an anti-cloning provision.
The Apple-HTC agreement requires the parties to resolve through arbitration any dispute over whether or not an HTC product is an "HTC Cloned Product" or whether a feature in an HTC product is an "HTC Cloned Feature". If the arbitrators determine that an allegation of cloning was baseless, HTC is fine. If there is a finding of cloning, HTC will have 90 days to remedy the problem, and if cloning doesn't end at that point, Apple "will be entitled to seek an injunction from any applicable court of competent jurisdiction with respect to such Cloning during the Term, subject to applicable governing law".
The anti-cloning part of the deal has some limitations. For example, if industry standards or the official Android specifications require HTC to implement certain functionality, Apple can't exercise its anti-cloning rights. In the latter case (official Android specs), Apple would have to sue Google directly (a scenario that the agreement doesn't appear to address because it doesn't have to). But HTC can use what Google provides without fear of being sued by Apple. Otherwise HTC would be at a fundamental disadvantage vis-à-vis other Android device makers. And while Google now knows these terms and could implement certain features just to help HTC and possibly others who will sign similar license deals in the future, Google also realizes that Apple might at some point enforce its rights against Google directly. Apple is obviously not afraid of Google. Otherwise it would never have sued HTC and other Google partners, and wouldn't continue to be suing a wholly-owned Google subsidiary, Motorola Mobility.
Stock Android (Android as published by Google) does not implement rubber-banding at this stage. The question is, therefore, whether Samsung's past implementation (which the jury looked at even though Samsung has already been avoiding the rubber-banding effect for about a year) would constitute "cloning". There would at least be an argument. The idea of the whole anti-cloning provision is not to prevent HTC from implementing some basic functionality, but if there's a viable alternative that doesn't "clone" Apple's technology, HTC must choose it. And in the case of the rubber-banding patent, there's no question that the "blue glow" is a viable alternative, even though it does not provide the most important user benefit of rubber-banding as I explained in the workaround analysis I linked to further above.
The limitation of the anti-cloning rule with respect to basic functionality is, however, key in connection with the pinch-to-zoom API ('915) patent. The Apple-HTC agreement says that "[f]unctionality and related methods (for example, 'pinch to zoom' functionality) will not be considered a Distinctive Apple User Experience". As a result, HTC can implement the pinch-to-zoom gesture without Apple asserting its '915 patent (or other related patents it may have) against it, and there would only be a problem if its specific implementation cloned some distinctive elements of Apple's user interface design (for example, an animation that visualizes the effect of the gesture, or a unique and novel way in which the gesture is applied to a particular type of documents).
This means that Samsung can certainly claim that Apple is willing to license the '915 patent, but Apple can equally legitimately claim that in the agreement with HTC it has not waived all of its rights to seek injunctive relief over that patent. It would depend on whether HTC's particular implementation constitutes cloning of the Distinctive Apple User Experience. One key difference between a court ruling on a motion for an injunction and a license agreement between private parties is that the court has much less flexibility. Judge Koh's choice is binary: she can enjoin Samsung from infringing that patent, or she can deny Apple's request. She can't impose an anti-cloning provision (and everything that goes with it, such as an arbitration clause) on the parties unless they agree on it. By ordering an injunction, Judge Koh would give Apple leverage and increase the likelihood of Samsung agreeing to an HTC-like agreement. By denying an injunction, she would allow Samsung to clone the Distinctive Apple User Experience, and would have to determine the amount Samsung would have to pay for continued infringement.
Considering that willingness to license has limited legal weight (but more psychological weight), it wouldn't be difficult for the court to dismiss the willingness-to-license argument based on the fact that Apple's license agreement is subject to an anti-cloning rule that is not at the court's disposal in the Samsung case.
Whatever the court will decide, it's a very interesting question whether Samsung will agree to a license deal with Apple along the lines of the one accepted by HTC, especially now that Samsung sees how most of the terms of these deals may ultimately have to be shown in public. The Apple-HTC deal is very lopsided. There are no two-way payments: it's all about HTC paying to Apple. The deal is under California law, and any arbitration proceedings would be under the auspices of the international division of the American Arbitration Association. HTC is not allowed to "clone" Apple's products and features, but the agreement doesn't limit Apple's use of HTC's patents. And various other details also reflect the fact that this was absolutely positively not a deal between equals. For strategic reasons and as a matter of pride, Samsung might not want to do a deal on such terms.
Even for Apple it wouldn't necessarily be a good idea to do a deal with Samsung on the same terms as it did with HTC. Samsung's market share is huge. For example, a provision under which Samsung is free to implement anything that Google makes available, and especially everything that Google's Android specifications require, would encourage Google to provide Apple-lookalike and Apple-workalike functionality to the dominant device maker, leaving Apple no other enforcement option than to sue Google directly. An Apple-Samsung deal might even have to involve Google from the beginning.
But today's hearing is going to be about the legal consequences of the jury verdict and it's unpredictable when Apple and Samsung will settle. It's certain that they will do so at some point, but nobody knows when. In a filing made a few hours ago in their second California litigation they both confirmed to the court that there's been no progress with respect to a settlement since their last status report in September.
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