Monday, December 31, 2012

ITC pushes back final ruling on Samsung complaint against Apple from Jan. 14 to Feb. 6

The United States International Trade Commission (USITC, or just ITC) has given notice of a scheduling decision concerning the investigation of Samsung's complaint against Apple. Originally, the U.S. trade agency was scheduled to hand down its final ruling on January 14, 2013, four months after Administrative Law Judge E. James Gildea's September 14, 2012 preliminary ruling that recommended the wholesale dismissal of Samsung's complaint. But in a determination signed on Friday (which entered the electronic docket of the case only today), it extended the target date for this investigation until February 6, 2013 -- which would represent a delay of two and a half weeks.

For my detailed analysis of Judge Gildea's initial determination, check out this early-October post. On November 19, the Commission (the six-member decision-making body at the top of the ITC) gave notice of a thorough review, with FRAND licensing issues being potentially outcome-determinative given that Samsung may prevail on one of its asserted standard-essential patents. The latest scheduling order mentions that "[t]he Commission has received numerous submissions in response to the notice [of review]", which invited not only the parties but also third-party stakeholders to express their views on FRAND issues of transcendental relevance.

Those "numerous submissions" included one filed by Google in the name of its wholly-owned subsidiary Motorola Mobility and advocating policies that clearly run counter to the positions Google advocated in its own name in connection with Apple's case against Samsung. Filings were also made by various other parties. I didn't report on all those submissions. One filing I did comment on was made by Research In Motion.

The fact that the order postponing the final ruling mentions "numerous submissions" on the FRAND issues raised could be due to the fact that the SEP-specific aspects of the case have become outcome-determinative. If the Commission knew at this stage that Judge Gildea's holdings would be affirmed, there would be no violation and thus no need to give any consideration to "numerous submissions" on FRAND. It's purely conjectural, but the Commission may at this point either have decided to reverse Judge Gildea's decision with respect to at least one SEP, or it may consider this such a close case that two weeks prior to the original ruling date such a reversal is at least possible.

Should the ITC order an import ban against Apple over FRAND-pledged SEPs, it faces serious blow-back from U.S. lawmakers. The ensuing political process could result in a far-reaching reform of the statute governing the ITC that could generally curtail its jurisdiction over patent infringement cases. The fact that Samsung just felt forced to withdraw its European SEP-based injunction requests and the development of case law in U.S. federal courts would turn the ITC into a huge loophole for SEP abusers.

Ten days ago, Apple filed a "notice of new facts" informing the Commission of Samsung's EU antitrust problems and pointing to an implicit admission on Samsung's part that SEP-based sales ban are not in the interest of consumers. Samsung's response entered the electronic file system today and argues that Apple's December 21 filing was out of time, given that the deadline for briefs on the FRAND issues in this case was December 10 and that Apple did not obtain permission to file such notice. I'm not sure this procedural argument matters given that Apple's notice merely pointed to developments in another jurisdiction that have some persuasive value and are not necessarily subject to any deadline. Also, if Samsung obtained a favorable decision (for example, a tentative rejection of patent claims by the USPTO) after a briefing deadline, it would likely also try to inform the Commission of any such development.

For the event that the Commission does not strike Apple's notice, Samsung provides the following short response -- I'll quote it paragraph by paragraph and comment below each paragraph:

"Samsung's decision to forego injunctive relief for certain declared-essential patents asserted against Apple in Europe has no bearing on any issue presently before this Commission and there is nothing inconsistent with Samsung's decision to seek redress here for Apple's violation of Section 337. As reflected in the press release cited by Apple, the European Commission is not advocating a per se rule barring 'the availability of injunctive relief for SEP holders.' (Apple's Notice of Dec. 21, 2012, Ex. B, European Commission Press Release of Dec. 21, 2012 at 2.)"

It's true that the European Commission does not say injunctive relief should never ever be available to SEP holders, but the Commission's press release makes clear that in this case, Apple is a willing licensee against whom the pursuit of the injunctive relief is, according to the EU antitrust regulator's preliminary ruling, a violation of competition rules. While Apple would prefer a bright-line rule against SEP-based injunctions, the European state of affairs is all that it needs to fend off Samsung's current wave of attacks. Also, there's no indication that Samsung has made Apple a different offer in the U.S. than elsewhere: it appears to have always demanded a worldwide 2.4% royalty rate.

"Here, unlike in Europe, a full trial on the merits has been held and an extensive evidentiary record developed. At the hearing, Apple had every opportunity to introduce whatever evidence it might have had to support its well-publicized assertions that Samsung acted in a manner contrary to obligations it may have owed to the European Telecommunications Standards Institute ('ETSI'). Yet Apple failed to meet that burden, and each and every one of its FRAND-related defenses was categorically rejected by the ALJ for failure of proof. Significantly, the ALJ concluded that Apple had failed to show that it was willing to negotiate a FRAND license for Samsung's declared-essential patents. (Initial Determination at 470.) That finding is directly contrary to the assumption being made by the European Commission at this very preliminary stage of its investigation. The evidence of record here demonstrated that Apple never had any intention of voluntarily entering into a FRAND license for any of the asserted Samsung declared-essential patents and Samsung expects the evidence to be developed in Europe to support a similar conclusion."

The above paragraph grossly misrepresents the stage of the EU investigation. The European Commission's Statement of Objections (SO) is certainly not final, but it's far beyond what can be reasonably labeled as "very preliminary". When the European Commission sent out (formally at its own initiative without an official Apple complaint) questionnaires about Samsung's conduct in the fall of 2011, it was conducting the equivalent of a preliminary investigation in the United States. In January 2012, the EU launched a formal, full-blown investigation after the preliminary one had shown that there was cause for concern.

An SO that comes down after almost a year of formal investigations means something, even though it's true that Samsung has the right to present its case at a hearing. Make no mistake: we're not talking about a situation in which Samsung is just now facing charges and gets to respond to them for the first time. Samsung's lawyers have had the opportunity now for well over a year (considering that the company also received at least one questionnaire in the fall of 2011 at the preliminary stage) to argue their case and to present all the evidence they believe exonerates their client, and they have been unable to dissuade the European Commission from taking action. In fact, even their client's last-ditch unilateral withdrawal of its European injunction requests didn't make the case go away.

"For the above reasons as well as those set forth fully in Samsung's briefs in response to the Commission's Questions, Samsung submits that there is no statutory or regulatory impediment that would prevent the Commission from granting the requested exclusion order in this Investigation."

While the ITC can order an import ban, the question is whether it will disagree with others who have concluded that Samsung's pursuit of injunctive relief is problematic. More than two months ago it also became known that the United States Department of Justice is investigating Samsung's conduct.

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Saturday, December 29, 2012

ITC judge wants Samsung to post a bond of 88% of its U.S. smartphone sales due to Apple patent case

An October 24, 2012 preliminary ruling that held Samsung to infringe four Apple patents could have more drastic consequences for Samsung's U.S. business than previously known. Late on Friday, a public redacted version of the full-length version of Judge Pender's initial determination and recommendation on remedy and bond entered the ITC's electronic document system. If the U.S. trade agency affirms the judge's findings of violations (which the ITC staff supports across the board) and adopts his recommended remedies, Samsung faces the following draconian combination of sanctions:

  • a U.S. import ban that would enter into effect after the 60-day Presidential review period following a final ITC decision,

  • a simultaneous cease-and-desist order that would prohibit the sale of any commercially significant quantities of the imported infringing accused products in the United States (this remedy was denied against HTC), and

  • the requirement to post a bond of 88% of the value of all mobile phones, 32.5% of the value of all media players, and 37.6% of the value of all tablet computers found to infringe Apple's patents-in-suit during the Presidential review period.

By comparison, Samsung argued that a 4.9% royalty rate was a more appropriate bond amount. Judge Pender adopted Apple's proposed methodology and rates, based on a "price differential analysis". The ITC staff supports that approach in principle and is fine with the bond rates for tablets and media players, but says that the 88% rate for mobile phones is based on too high a price differential between the two companies' products because Samsung sells significant quantities of phones at a much lower price point, such as $200 (compared to a $600 non-subsidized iPhone), and the ITC staff believes that those lower-cost phones don't really compete with Apple's offerings and shouldn't be taken into account for the purpose of a price differential analysis. But Judge Pender points to an internal Samsung presentation according to which the U.S. mobile phone market was "becoming a Two Horse Race Between Apple & Samsung" and which suggested a strategy of undercutting Apple.

Judge Pender notes that Samsung claimed a price differential analysis is not adequate and warns Samsung that if it "continues to press" this argument, he would recommend to raise the bond rate to 100% for all infringing products sold during the 60-day Presidential review period.

The judge's recommendations are all subject to a review by the Commission, the six-member decision-making body at the top of the ITC.

While all of this looks like a potential worst-case scenario for Samsung, the picture is not that bleak. Judge Pender cleared various Samsung designarounds, and if those designarounds are not only legally safe but also technically adequate and commercially viable, Samsung can keep importing and selling. Even the initial determination does not explain why the designaround products don't infringe: it appears that Samsung presented them and Apple did not dispute Samsung's non-infringement claims on the merits but just opposed the adjudication of the designarounds on procedural grounds. Reexaminations are another opportunity for Samsung. While they take time (a lot more time than ITC investigations), Apple's winning patents are under pressure. A first Office action by the USPTO tentatively rejected all claims of the "Steve Jobs" touchscreen heuristics patent, which is at issue in this ITC investigation, and recently an anonymous reexamination request against another patent-in-suit (one that covers translucent images) became known.

If those mysterious designarounds enable Samsung to continue to do well in the U.S. market, an ITC order based on Judge Pender's recommendations could still create logistical complications for its U.S. business. For example, during the short Presidential review period, it might have to post a bond even on products that already have been designed around the patents-in-suit. Also, customs officers may hold up shipments of designaround products until they are certain that an exclusion order doesn't apply to them. And Samsung is worried that this could also affect other electronic media devices, including televisions, laptops, non-smartphone mobile phons, cameras and camcorders, or standalone components, even though Apple did not accuse any of those kinds of products of infringement. It wants some "special guidance" to be given to customs, but Judge Pender is against that proposal.

On a related note, Reuters' Dan Levine yesterday reported on Apple's decision to drop, for the time being, any charges against the Samsung Galaxy S III mini in the parties' second California litigation (a case that is scheduled to go to trial in 2014), based on Samsung's representation that it does not sell the device in the U.S. and only for as long as Apple believes that this representation is still accurate. Apple's lawyers bought various units of the S III mini from U.S. retailers such as Amazon, but it appears that Samsung is not actively selling and marketing it in the United States, so whoever sells it has to take the initiative to source it from other countries. I don't know if Samsung had a particular market-specific reason for which it thought U.S. consumers would not be interested in the S III mini, or whether this strategy of saying "we make the product but sell it only in other countries" is, possibly in no small part, a response to Samsung's patent infringement issues in the dispute with Apple. Theoretically Apple could sue resellers over that device, but those are also customers of Apple's own products and it may not be worth the hassle for only one particular device.

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Friday, December 28, 2012

Cisco, HP, Walmart, others support Judge Posner, propose methodologies for patent damages

While I remain focused on mobile patent (and related competition) issues, I'm well aware that a Pennsylvania jury's shocking $1.2 billion damages verdict against chip maker Marvell (here's Marvell's statement) is the biggest patent litigation news during this last week of 2012. Theoretically that award could even be tripled for willfulness, in which case the damages award would exceed Marvell's market capitalization. I don't have an opinion on the details of that case, but just by looking at the numbers and considering the huge number of patentable inventions that go into a chip, I can't help but feel that it was an abdication of its discretion by the district court to allow Carnegie Mellon University to present its claims to the jury, which then supported them in their entirety -- because regardless of whatever CMU may have invented and whatever Marvell may have used, nobody in this industry could have a viable business in the United States if such damage awards were in line with the law.

Marvell's market cap is substantially below Samsung's quarterly profits. I already noted on Twitter that last summer's $1 billion verdict in Apple's favor against Samsung looks "kind of modest" now. Actually, it pales by comparison.

By coincidence, Marvell's lead counsel, Quinn Emanuel's Kevin Johnson, was also on Samsung's team in the Apple trial. For a firm that claims on the front page of its website that its lawyers won 90% of the cases they tried, it must be almost disheartening to be on the receiving end of two billion-dollar patent damages verdicts within only four months of each other. Companies with a patent infringement problem should be realistic about how much a law firm can do for them. I don't know about the work QE did for Marvell, but what they have done and continue to do in the Apple-Samsung case is very impressive -- the problem is just that Samsung added its own design patent infringements (very costly under U.S. law) to Android's manyfold software patent infringements, and there was strong evidence of a strategy to copy Apple. There really is a lot of money at stake in Apple-Samsung: if Samsung could solve the whole Apple patent problem by paying a billion dollars, it would do so any day of the week. In the CMU-Marvell case, there's also a finding of willfulness, but again, the numbers just don't make the slightest sense. The Apple-Samsung award needs to be adjusted here and there, but the CMU-Marvell award must simply be tossed or slashed in order to protect the innovation economy against patent unreasonableness.

The cross-appeal of Judge Posner's Apple v. Motorola Mobility ruling is probably the best near-term opportunity for the Federal Circuit to address two pressing problems at once: the one of injunctive relief over FRAND-pledged standard-essential patents, and the one of reasonable patent damages (for SEPs as well as non-SEPs), a problem that this week's $1.2 billion lunacy highlights. I've always been much more interested in injunctive relief than damages questions because injunctions are the far more impactful remedy in disputes between major industry players. I've been opposing SEP-based injunctions for a couple of years, and I also focus on FRAND royalty calculation issues, but I'm still in the process of forming an opinion on how non-SEP damages should be calculated. Without a doubt, however, there's a need for improvement -- not only in the United States, by the way, even though the most spectacular patent damages awards tend to come down in that jurisdiction.

So without this representing a ringing and unconditional endorsement, but in light of the presently-heightened interest in patent damages and a need for constructive, rational debate, I wish to draw additional attention to a set of proposals that an interesting group of companies submitted to the Federal Circuit in the form of an amici curiae brief on the Posner appeal. Here's the document, and I'll talk briefly about the companies behind it and their proposals further below:

12-1548 Brief of Amici Curiae Altera Et Al.pdf

These are the "friends of the court" who submitted the brief:

You can read the details of their brief yourself, but let me highlight the fact that it advocates a fundamental departure from certain existing damages rules, in particular, the 15 Georgia-Pacific factors (by which Judge Posner also seems rather underwhelmed), which the briefs says "fail to provide meaningful guidance and are not a reliable methodology for calculating reasonable royalty damages", and the Entire Market Value Rule (EMVR), which Cisco and friends says "should presumptively be abolished". The brief is not anti-patent, but it's clearly the kind of submission companies make if they think that minor adjustments are insufficient and fundamental change is needed. Whether one agrees with this approach or not (again, I'm still learning and thinking about all of this), it definitely makes it an interesting read.

The Georgia-Pacific factors and the EMVR appear quite reasonable at first sight, but these amici curiae argue that "generalized methodologies currently used to calculate reasonable royalty damages lead to inconsistent and unreliable results because they are not sufficiently tied to the patent invention". The latter part of this shows what these companies would like to happen: they would like the courts to "focus on the value of the patented invention at the time of the design to a reasonable licensor and licensee", and wherever possible, such damages "should be capped at the incremental value of the patented invention over the next best alternative".

I don't think one can make an argument that the Georgia-Pacific factors or the EMVR are biased frameworks for patent damages. Theoretically, judges could use them as tools to prevent excessive damages claims to be presented to a jury, and in a perfect world with perfect juries, jurors could also apply those rules to the benefit of innovation. I believe Georgia-Pacific doesn't work well for FRAND royalties because simulating a negotiation between two parties would allow patentees to capture post-standardization hold-up value. Apart from that, this framework is not inherently unbalanced. There's something in it for everyone. It's even open-ended, a fact that Judge Posner has criticized. In the world in which we live, judges as well as (especially) juries are often misguided, even if they have the best intentions. These are complex cases that even industry experts with a strong business and technical background have a hard time figuring out. In light of that reality, the question must be whether a set of rules does or does not work -- a results-based approach. Something can be scientifically brilliant but not practicable. And that's what I believe the patent damages debate (including, as a subset with unique characteristics, the FRAND royalty debate) will mostly be about.

In this regard, it's important not to attach disproportionate weight to spectacular outliers like the CMU-Marvell verdict. This is a lunacy, it may be fixed by the district court itself in the post-trial proceedings, and if not, the Federal Circuit can still solve the problem. There are many patent trials in the U.S. every year, and one can't judge the system only by the outliers. That said, I have a lot of sympathy for those who look for rational ways to prevent those outliers from occurring in the first place.

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Android-Android war raging in Korea as LG seeks injunction against Samsung Galaxy Note 10.1

Dow Jones Newswires reports on a statement by LG Display according to which it has requested a Korean court to "completely stop the sale, manufacture, and importation" of Samsung's Galaxy Note 10.1 tablet computer over the alleged infringement of three display patents. The injunction request is apparently a response to a December 7 Samsung lawsuit alleging the infringement of seven liquid crystal display (LCD) patents.

Display technology patents are generally outside my focus, and I don't have first-hand access to information on Korean lawsuits (I can access official documents in the U.S., and attend court hearings in, or at least obtain and analyze rulings from, several European jurisdictions). So I won't follow this in detail, but I do want to share three observations, just quickly:

  1. Both Samsung and LG are members of the Open Handset Alliance (OHA), the Google-controlled consortium behind Android. [Update on January 1, 2013] LG Electronics asked me to clarify that LG Display, which is suing Samsung, is a separate legal entity from LG Electronics. While both are part of the wider LG group, they have different legal teams, including their own intellectual property groups. [/Update] LG is now trying to get a major Android tablet banned.

    Hardware differentiation among device makers distributing the same mobile software platform is key, and it's not only in Google's interest but also good for consumers. And if company A believes that company B steals its hardware innovations, the only legal recourse it has is to bring patent infringement actions. In the alternative, everyone would be free to copy, which would run counter to the idea of differentiation and would serve as a disincentive for continued innovation. Therefore, the fact that both companies are members of the OHA doesn't mean that an Android-Android hardware patent lawsuit is unacceptable.

    An Android-Android software patent dispute would be a different thing. Competition among Android device makers is extremely fierce, with only Samsung making serious money and all others, except for Google-subsidized Motorola Mobility, being involved in a race to the bottom that no one except ZTE and Huawei can ultimately win. One way for some companies to escape from this race to the bottom would be to assert patents against weaker rivals. In August ,2011 Motorola Mobility, just a few days before reaching an agreement with Google, indicated that it was going to use its patents in order to gain a competitive advantage over other Android device makers. The acquisition took care of that threat, at the price of $12.5 billion that bought Google very little leverage against Apple and Microsoft. It remains to be seen whether other Android device makers will look for ways to use patents in order to enhance their relative competitiveness within the Android ecosystem. Most Android device makers are extremely weak in terms of patents, but they aren't all equally weak, and for an example, I wouldn't rule out that Sony owns some patents that could really be leveraged. If someone finds he's a little less weak, he may consider bullying some others.

  2. The OHA's rules apparently don't prevent Samsung and LG from asserting hardware patents against each other's Android-based products (in the alternative, the OHA would probably be an illegal cartel). Google is sitting on the sidelines watching its allies -- both companies have built "Nexus" lead devices for Google -- fight each other over display patents. Ultimately the solution will be a license deal, which will come with payments and, possibly, some restrictions concerning patents that protect differentiation. If Google accepts and even benefits from display patent enforcement within the Android ecosystem, it should also respect the intellectual property of patent holders from outside that ecosystem, such as (in alphabetical order) Apple, Microsoft, Nokia, and Oracle. Or even the lesser-known ones such as Gemalto, whose Android patent infringement case (brought against Samsung, HTC and Motorola in 2010) will go to trial in a few months. If Samsung and LG can protect their display technologies, there's no reason why other companies shouldn't protect their IP as well.

  3. Samsung's meteoric rise has made the company a prime target of patent infringement lawsuits. To some extent, that's just normal, and Samsung has the resources and the sophistication to deal with this. But it's currently fighting a multi-front war: it just retaliated against Ericsson, received a Statement of Objections from the European Commission over its assertions of standard-essential patents against Apple, is embroiled in more than 50 lawsuits worldwide with Apple, and now it has this fight with LG going on. Samsung would be well-advised to resolve as many issues as possible through licensing and focus only on the strategically most important battles.

    One company with which Samsung should seek a license deal if it doesn't already have one in place is Nokia. In my commentary on last week's Nokia-RIM settlement I expressed my belief that Nokia and Samsung most likely have an SEP license agreement in place, but Nokia is increasingly monetizing and asserting certain non-SEPs as well. I can't imagine that Samsung doesn't use any of Nokia's non-standard-essential inventions, given the breadth, depth and strength of that portfolio, so a solution is needed (unless it's already in place without anyone knowing about it).

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Wednesday, December 26, 2012

These are Samsung's seven patents-in-suit against Ericsson: the emphasis is on 4G/LTE

On Monday this blog was first to report on Samsung's ITC countercomplaint against Ericsson, a post that was picked up by Reuters and other high-profile media. Meanwhile I've been able to download a copy of Samsung's complaint and can provide more information on the patents-in-suit and the products and technologies at issue.

Samsung is asserting seven patents, none of which has previously been asserted anywhere (court or trade agency), even including the international counterparts of those patents.

These are the seven patents-in-suit:

  1. U.S. Patent No. 7,782,749 on a "method for mapping physical downlink control channel to resources and apparatus for transmitting/receiving the mapped physical downlink control channel in a wireless communication system"

  2. U.S. Patent No, 8,165,081 on "control and data multiplexing in communication systems"

  3. U.S. Patent No. 8,208,438 on a "method and apparatus for allocating resources of a control channel in a mobile communication system using orthogonal frequency division multiplexing"

  4. U.S. Patent No. 8,228,827 on a "method and apparatus for detecting contention during random access procedure in a mobile communication system"

  5. U.S. Patent No, 6,617,929 on a "full output matching apparatus of a microwave doherty amplifier"

  6. U.S. Patent No, 6,767,813 on an "integrated circuit devices having active regions with expanded effective widths and methods of manufacturing same"

  7. U.S. Patent No. 6,865,682 on a "microprocessor module with integrated voltage regulators"

Samsung is asserting these products against "wireless communications systems and equipment used in those systems, such as wireless communication base stations", and clarifies that "[t]he technologies at issue relate to wireless communications base stations for use with LTE applications and including certain Doherty amplifiers, semiconductors, and/or microprocessor modules or components".

The '749, '081, '438 and '827 appear to have been declared essential to LTE. Samsung's infringement allegations are LTE-based and the complaint makes reference to Samsung's ETSI (European Telecommunication Standards Institute) disclosures. In connection with two other patents ('929 and '682), LTE is also mentioned but without any reference to Samsung's ETSI disclosures, suggesting that Samsung does not consider them standard-essential. The '813 patent is asserted against Ericsson products having an "integrated circuit device having active regions with expanded effective widths", and this does not appear to be standard-specific.

In an effort to satisfy the ITC's domestic industry requirement, Samsung points to the fact that it "has sold or sells in the United States base stations, including LTE base stations sold to MetroPCS and Sprint ('eNodeB')", which is another example of Samsung competing with Ericsson in its core business, as well as "mobile stations, including [...] Galaxy Nexus, Galaxy S II Skyrocket, [...] Galaxy Tab 10.1, Galaxy Tab 8.9, Galaxy Tab 7.7, Galaxy Note, Galaxy Note II, [...] Galaxy S III and the Verizon Mobile Hotspot LTE".

In a public statement on this ITC complaint, Samsung claimed to have "sought to negotiate with Ericsson in good faith". Conversely, one of Ericsson's federal lawsuits alleges that Samsung breached its FRAND licensing pledge. Without more information on the companies' positions and their mutual allegations, I don't have an opinion on who's right or wrong. Let's wait and see what information surfaces as this dispute unfolds (and before it gets settled, which it will without a doubt).

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IEEE to court: don't rely on standards bodies to 'take a direct role in enforcing patent commitments'

In early November I already said that the Federal Circuit was going to "receive input from many key stakeholders" concerning Google's (Motorola Mobility's) appeal of the FRAND part of Judge Posner's Apple v. Motorola ruling. Those who openly side with Apple (and, by extension, Judge Posner) on the FRAND part of the case were granted more time to file their amicus curiae briefs, but various stakeholders who formally don't support either party have already made their filings.

Today I finally got access to a submission by the Institute of Electrical and Electronics Engineers (IEEE), whose standard-setting unit, IEEE-SA, "is one of the standards development organizations ('SDOs') to whom licensing assurances were given on patents at issue in this litigation". That's because some of the standard-essential patents (SEPs) Motorola is asserting against Apple have been declared essential to IEEE 802.11 (WiFi, or WLAN). Google's Motorola Mobility is also suing Microsoft over such patents in the Western District of Washington (two months ago it withdrew a couple of related patents from the ITC investigation of its complaint against Microsoft's Xbox gaming console).

While the IEEE's brief is formally filed "in support of no party", it will be rather difficult for Google (Motorola) to get any mileage out of it, while Apple (and Microsoft in the Western District of Washington) will undoubtedly find some useful statements.

A large part of the brief is a purely factual description of the IEEE standard-setting process in general and its approach to SEP licensing commitments in particular. For example, the IEEE clarifies that "the absence of [a Letter of Assurance] (or the submission of an LOA that indicates an unwillingness to provide any kind of assurance) is a factor that the IEEE-SA may consider when deciding whether to approve the draft standard". In other words, by making a FRAND licensing commitment to its SEPs, a company provides an assurance to the IEEE that clears one potential hurdle on the way to adoption of a new standard. The IEEE's amicus brief stresses that it's key to "protect the value and integrity of the patent commitment made to IEEE-SA in LOAs". The commitment is meant to protect against potential hold-up (potential, not just actual), it's irrevocable, and binding on successors and assignees.

The IEEE is perfectly honest about the fact that the R in FRAND is interpretable:

"The term 'reasonable,' however, is inherently vague, and the ability of patent commitments to protect against holdup is thus imperfect.22 Sometimes this vagueness (and the consequent inability of parties to agree on a negotiated, 'reasonable' license) will lead to expensive litigation whose cost and risk can impede the adoption of a socially valuable standard. Even without litigation, the ex post negotiation of license terms (that is, negotiations occurring after a technology's inclusion in a standard) can lead to higher royalty payments and ultimately higher prices to consumers."

The last sentence is also relevant to the FRAND rate-setting dispute between Microsoft and Motorola Mobility in the Western District of Washington, where Judge James L. Robart recently held a bench trial and is now working on a rate-setting decision. Microsoft and Google (Motorola) disagree on methodology. While it's difficult in most cases to point to ex-ante (pre-standard-setting) agreements between parties, Microsoft's proposal is to at least do whatever can be done to come as close as possible to the result of an ex-ante negotiation, and Motorola's contrary suggestion is to simulate a bilateral negotiation in accordance with the Georgia-Pacific factors, a framework that Google (Motorola) hopes will allow it to capture hold-up value. The IEEE's submission to the Federal Circuit clearly warns against the negative effects, which ultimately harm consumers, of such an approach.

With the IEEE admitting that "reasonable" can give rise to litigation, the question is what the IEEE and other standard-setting organizations can and will do to address the issues identified. The amicus brief suggests that the IEEE would generally encourage greater clarity but doesn't require it at this stage:

"IEEE-SA's current patent policy expressly permits (but does not require) the submitter of a patent commitment to provide with its commitment (i) a not-to-exceed license fee or rate commitment, (ii) a sample license agreement, or (iii) one or more material licensing terms. Other approaches (such as VITA Standards Organization's policy for mandatory disclosure of maximum rates) are also possible."

Without some consensus among contributing patent holders the IEEE obviously can't tell a court that it wants to go down that avenue. It can merely describe potential paths.

Six months ago, European Commission Vice President Joaquín Almunia called on courts, regulators and industry to make their specific contributions to the fight against FRAND abuse. In the Samsung case the European Commission is demonstrating world-class regulatory leadership: last week it issued a Statement of Objections. I'm reasonably hopeful that other competition enforcers will also take serious action. But it's also important that the courts do what they can under the applicable laws. That's what the IEEE is telling the Federal Circuit:

"This Court should not assume that SDOs will necessarily take a direct role in enforcing patent commitments. First, for SDOs to enforce patent commitments directly would impose costs on SDOs (and on the standards development process) that are better borne by implementers and patent holders. Second, the technical knowledge embodied in the standard (and thus the ability to understand the role that a patent might play in that standard) will typically reside not in the SDO itself, but with the volunteers who developed the standard. Third, an SDO's direct enforcement of patent commitments would diminish the ability of an SDO to remain a neutral forum."

But the IEEE wants to keep its options open:

"SDOs should not be prohibited, of course, from seeking to enforce such commitments directly where the SDO believes it appropriate to do so. Cf. Understanding Patent Issues During IEEE Standards Development Patented Technology in IEEE Standards at ¶ 30, supra ('In certain circumstances and at its sole discretion, the IEEE may also seek to enforce the terms of an Accepted Letter of Assurance.')."

All in all, I believe the IEEE would like the Federal Circuit to affirm Judge Posner's ruling, at least in some respects, but the amicus curiae brief does not say so directly, and it navigates around the key issue of injunctive relief. The words "injunction", "injunctive" and "[to] enjoin" don't appear even once in the 24-page submission. But I'm sure there won't be a shortage of amicus curiae briefs touching on that issue next year.

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Apple leverages Samsung's EU antitrust problems and recent statement in USITC proceeding

Today a "notice of new facts" that Apple's counsel filed on Friday in connection with the ITC investigation of Samsung's complaint entered the public record. On November 20 I already reported that FRAND issues are key to the ongoing review of an initial determination that didn't hold Apple to infringe any valid Samsung patents, given that Samsung is not completely unlikely to prevail on one of its standard-essential patents (SEPs).

Apple's notice informs the ITC of Samsung's "remarkable about-face [last] week" in the form of "withdrawing its requests for injunctive relief on allegedly standard-essential patents in its pending cases against Apple in courts throughout Europe", and of the issuance of a Statement of Objections (SO), which is a preliminary ruling and bears considerable weight.

Apple presents Samsung's entire statement on the withdrawal to the ITC, based on this report by CNET's Don Reisinger, which serves as Exhibit A to Apple's notice. This is what the corporate statement said:

"Samsung remains committed to licensing our technologies on fair, reasonable and non-discriminatory terms, and we strongly believe it is better when companies compete fairly in the marketplace, rather than in court. In this spirit, Samsung has decided to withdraw our injunction requests against Apple on the basis of our standard essential patents pending in European courts, in the interest of protecting consumer choice."

And this is how Apple highlights the striking contradiction between Samsung's statement on the European withdrawal and the position it takes vis-à-vis the ITC:

"Here, in the [337-TA-]794 [ITC] Investigation, Samsung recently argued that 'U.S. customers will not be harmed if an exclusion order is entered here,' and '[t]o the contrary, the interests of U.S. consumers favor the enforcement of standard-essential patents[.]' (Samsung's Initial Submission, Dec. 3, 2012, Public Version at 19.) Samsung's new admission in Europe that foregoing injunctive relief is 'in the interest of protecting consumer choice' fundamentally contradicts its position here in the ITC, and demonstrates that its pursuit of exclusionary remedies on declared-essential patents is in fact anticompetitive."

This is quite a "gotcha". I also wrote in my commentary on Samsung's withdrawal that "I would encourage Samsung to do so in other jurisdictions as well". Apple is now basically making the same suggestion. Rightly so. What's good for the goose is good for the gander. And what's good for European consumers (on that one I totally agree with Samsung) should not be withheld from consumers in the United States, Asia, Australia, or anywhere else. Are Americans second-class citizens compared to Europeans? I don't think so. And I don't believe Samsung thinks so either. But then its explanation doesn't make sense.

In retrospect it would have been a smarter choice for Samsung, on this global chess board, to provide a rationale for the European withdrawals that does not weaken its case elsewhere, especially at the ITC. For example, Samsung could have made a law-of-the-land argument: this is Europe, it's different from the rest of the world, and we've decided to respect the continent's special rules that have a certain tradition in the overall interoperability context. It could even have said that this was meant to be a conciliatory gesture toward the European Commission. All of this would have been more defensive than the consumer-friendliness claim, but it would not have adversely affected its ITC case, and two days after Samsung's withdrawal everyone could see why it happened: because Samsung had an SO coming from the European Commission.

Through its notice Apple also tries to get mileague out of the fact that an SO was issued. The SO itself is not publicly available (a future ruling by the European Commission would be published in a redacted form, but we're far from that point). But the EU regulator's press release and related Q&A document provide Apple with high-level preliminary findings that definitely have a bearing on some of the public interest issues surrounding the ITC investigation in which Samsung is seeking a U.S. import ban. It is a preliminary finding of anticompetitive behavior, the Commission describes Apple as a "potential licensee [that] has shown itself to be willing to negotiate a FRAND licence for the SEPs", and it furthermore explains that "recourse to injunctions harms competition" in such a case. An ITC import ban is also a form of injunctive relief. It furthermore makes Samsung look bad that its unilateral withdrawal "does not alter the [European] Commission's preliminary conclusions about the anti-competitive nature of Samsung's conduct thus far" (as the European Commission's Q&A states).

The U.S. and the EU are obviously different jurisdictions, and the ITC, a trade agency with IP-related quasi-jurisdictional competencies, is not the counterpart of a competition enforcer (that would be the FTC and the DoJ in the U.S., and the European Commission's Samsung Q&A notes close contact between those agencies). Also, an SO is just a preliminary ruling (though it does mean quite something after almost a year of formal in-depth investigations). That said, the ITC will understand that if it granted Samsung (or any other SEP abuser) a U.S. import ban while other decision-makers in the Western hemisphere -- U.S. federal courts as well as the European Commission and various European courts -- vigorously oppose the pursuit and the enforcement of injunctive relief against willing licensees, it would appear to disregard the interests of consumers and of a functioning standards system. And there are some influential lawmakers on Capitol Hill who would not view this favorably.

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Monday, December 24, 2012

Samsung hits back at Ericsson with its own request for U.S. import ban over wireless patents

Samsung's fighting spirit is well-known to everyone who follows its Earth-spanning patent dispute with Apple. Its overly aggressive assertions of standard-essential patents (SEPs) against Apple in Europe have just netted it a Statement of Objections (SO) from the European Commission's Directorate-General for Competition, and Samsung continues to assert non-SEPs against Apple: on Friday it also became known that a new lawsuit had been filed in Korea over the iOS notification center.

It was obvious that Samsung was going to respond to Ericsson's two late-November U.S. lawsuits, followed by an ITC complaint (request for U.S. import ban) mirroring one of the two federal lawsuits, both defensively and offensively. In this business, Christmas is not a time for forgiving.

The defensive part began with a letter Samsung sent to the ITC on December 14, arguing that the import ban requested by Ericsson would be against the public interest and discouraging an investigation of Ericsson's complaint. I will talk some more about Samsung's letter, which is particularly interesting in light of the situation concerning Apple, and Ericsson's response further below.

On Friday (by coincidence the same day that the European Commission issued the aforementioned SO and that the notification center lawsuit in Korea became known), Samsung also went on the expected counteroffensive against Ericsson. The law firm of Kirkland & Ellis, which unlike Quinn Emanuel is not the driving force behind Samsung's SEP assertions against Apple, filed an ITC complaint targeting "Certain Wireless Communication Equipment and Articles Therein" imported by Ericsson into the United States. The complaint itself has not entered the public record yet. If it does later today, I will update this post accordingly; otherwise I will do a follow-up post to list the patents.

In my previous reports on Ericsson's patent assertions against Samsung I did not mention something I found out in the meantime: while the two companies are no longer competing in the wireless gadgets market, Samsung is now also building a telecommunications infrastructure business. Samsung's foray into Ericsson's market is much less talked about than its Galaxy phones and tablets, but it's starting to show results. For example, in August 2012, Samsung announced an LTE infrastructure deal with a UK carrier named Three, which it described as its "first commercial mobile network roll-out in Europe", Ericsson's home continent.

I'm sure that at this point no one in the industry would underestimate Samsung's ability to become a significant player, if not the leader, in a new segment of the overall market for telecommunications hardware. This certainly adds a more strategic dimension to the Ericsson-Samsung dispute. The amount of royalties paid by a company to a direct competitor always has implications going beyond a mere financial transaction.

From a tactical point of view, Ericsson can accuse Samsung's infrastructure business in its infancy as well as its hugely profitable consumer devices business, while Samsung has to focus on Ericsson's infrastructure products, which are, however, a huge target all by themselves.

Samsung would rather keep its gadgets out of the dispute. On December 14, the law firm of Fish & Richardson sent the aforementioned public interest statement on Samsung's behalf to the ITC. The letter argued that "exclusion [of Samsung's products from importation into the Unnited States] would create a void in the marketplace, harming consumers and wireless carriers, that neither Ericsson nor its licensees can fill", claiming that "Samsung currently sells more mobile phones, smartphones, and Android-powered tablet computers in the United States than any other company", pointing to "more than 2,000 U.S. personnel involved in commercializing and supporting these devices in the U.S. market", and boasting "the largest breadth of distribution for its products in the United States" (the "big four" carriers -- AT&T, Sprint, T-Mobile, and Verizon -- as well as "many local and regional carriers, such as US Cellular and MetroPCS"). Some of the same arguments are also made by Samsung against the import ban requested by Apple -- but this paragraph here is, on its face, an argument that Apple makes against Samsung:

"Finally, consumers and competitive conditions in the U.S. economy would be adversely affected by an exclusion order in this instance because the record will demonstrate that Ericsson has failed to discharge its FRAND obligations for the purportedly standards essential patents asserted in its complaint."

Just to be clear: while the European Commission's SO, which is a preliminary ruling following about a year of investigations, as well as some national court rulings suggest that Samsung has not lived up to its FRAND promise in its dealings with Apple, none of that proves (or strongly suggests) that Samsung has done the same vis-à-vis Ericsson. And in particular, whatever misconduct there may have been in Samsung's dispute with Apple is factually unrelated to the question of whether Ericsson is honoring its FRAND pledge in its dealings with Samsung. As the dispute unfolds, more facts will become known about the mutual FRAND issues between Ericsson and Samsung. Samsung's letter does not elaborate on the allegation of FRAND non-compliance, and Ericsson dignified it only with a footnote that flatly disputes Samsung's "conclusory and unsupported assertion".

Ericsson's reply stresses that its licensees, specifically naming Apple and Google's Motorola Mobility, can fill any void left by an exclusion of Samsung devices from the U.S. market.

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Saturday, December 22, 2012

Samsung reportedly sues Apple over notification center patent in Korea

PatentlyApple yesterday brought to the attention of other media a report by the BrightWire news service, citing Korean news site iNews24 as its source, according to which Samsung has filed a patent infringement action against Apple in South Korea over a notification center patent.

In all likelihood this is a non-standard-essential patent. Clearly, Samsung needs to step up its non-SEP assertions against Apple because its original SEP-centric litigation strategy has been a near-total failure: it obtained injunctive relief only in Korea (but enforcement has been stayed for the duration of the appeal), an entitlement to damages (which have yet to be determined but will be modest) in the Netherlands, lost out on various claims in the U.S. and several European countries, received a skeptical initial indication by an Australian judge, and yesterday found itself at the receiving end of a Statement of Objections, a preliminary antitrust ruling, by the European Commission despite having unilaterally dropped its European SEP injunctions requests in a last-ditch effort that was apparently too little, too late to dissuade the EU's top competition enforcer from determining on a preliminary basis that Samsung needs to be fined for the past pursuit of injunctions anyway.

Without more detail it's hard to form an opinion on the merits of Samsung's notification center infringement claim.

Even Apple's loyal fans over at Cult of Mac say "it's hard to deny that Apple didn't take a little bit of inspiration back from from Android, too", and acknowledge the following:

"[Apple's] Notification Center is an almost identical copy of Android's -- that's easy to see no matter which side of the fence you're on."

But this doesn't necessarily mean that Samsung owns a patent that reads on the iOS Notification Center. Google was just granted a notification center patent in the United States, but Samsung can't patent what Google creates. It can patent some further enhancements of Google's creations, or it can acquire a patent from Google (if Google feels it should give ammunition to its Android partners to sue Apple, or that it should compensate for the poaching of Samsung talent), but there's no such thing as shared patent ownership among an entire ecosystem.

As I reported this week, Samsung continues to bring new infringement contentions in the U.S. (as does Apple), such as recent allegations that the FaceTime videotelephony software infringes a patent Samsung acquired last year from a group of U.S. inventors. The patent used against FaceTime also appears to be non-standard-essential. It will most likely expire before Samsung would (if ever) win an injunction over it, but again, it's a positive thing that Samsung increasingly relies on non-SEPs. Apple is also asserting exclusively non-SEPs against Samsung.

As an aside, I'd like to mention that a Finnish Twitter follower of mine yesterday suggested that Nokia "[s]hould finally go after Samsung" (in response to my report on RIM's decision to pay royalties to Nokia). I presume that Samsung already has a license to Nokia's cellular SEPs: I don't know of anyone in the industry who doesn't, besides ViewSonic (which Nokia is suing in Mannheim, Germany, over SEPs as well as non-SEPs). But Nokia is now clearly more interested than it used to be in selling licenses covering certain non-SEPs. The RIM deal involves not only WiFi (WLAN) SEPs but also some non-SEPs (otherwise Nokia wouldn't have agreed to withdraw the related lawsuits in Germany). Nokia is suing Android device makers HTC and ViewSonic over non-SEPs as well (in the U.S. and in Germany). In a handful of these cases, Google has already chosen to intervene because its own core apps and services are at issue. Unless Samsung and Nokia already have a license agreement in place that covers such patents, it's a given that Nokia will at some point insist that Samsung take a license. If Samsung still needs a license, it will probably watch closely any developments in Nokia's U.S. and German lawsuits against HTC and ViewSonic. Nokia emerged victorious from its disputes with Apple and RIM, it will undoubtedly defeat HTC and ViewSonic, and I can't see how Samsung could avoid being the net payer under any deal with Nokia.

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Friday, December 21, 2012

European Commission issues Statement of Objections against Samsung over SEP abuse

The European Commission is known to have a preference for announcing important antitrust announcements right before the Holiday Season or the general summer vacations. This way, the parties concerned and everyone else have the opportunity to digest the announcement at relatively slow times of the year, and the Commission does not have to deal with countless questions on the following days.

Yesterday European Commission Vice President Joaquín Almunia already indicated that the adoption of a Statement of Objections (SO) against Samsung over its pursuit of injunctions against Apple based on standard-essential patents (SEPs) was imminent. The announcement validated what I wrote two days earlier about the only plausible motivation for Samsung's withdrawal of its European SEP-based injunction requests against Apple being pressure from the EU.

At close of business today the Commission issued a press release announcing that Samsung has been served an SO, which is a preliminary ruling. This means we're past the stage of Samsung merely being suspected of abuse of a dominant market position (this theory is not based on Samsung's smartphone market share but on the leverage that SEPs give their owners), but that the Commission has preliminarily determined, after almost a year of formal investigations (which followed several months of preliminary ones), that Samsung has indeed committed abuse and should be sanctioned. Samsung gets to reply in writing and is entitled to a hearing prior to any sanctions, with a hearing typically taking place about a year after an SO. The final ruling could be different from the SO. Theoretically, Samsung could still come away unscathed.

In addition to the press release, the Commission also published a Q&A. The Commission previously explained its positions on FRAND licensing, such as in connection with the Google-Motorola merger review. Today's Q&A addresses a number of key questions. Several of them relate to the question of whether the Commission is intervening in a private patent dispute or changing the rules for patent enforcement, and the document makes it clear that there is generally no problem with intellectual property enforcement through injunctive relief but "the Commission takes the preliminary view that the seeking of an injunction for SEPs can constitute an abuse of a dominant position in the exceptional circumstances of this case - where the holder of a SEP has given a commitment to license these patents on FRAND terms and where the company against which an injunction is sought is willing to negotiate a FRAND licence".

What I just quoted also implies that Samsung's well-documented 2.4% royalty demand was considered excessive. Otherwise the Commission would expect Apple to meet that demand, and would not refer to Apple as a company that is "willing to negotiate a FRAND licence". One of the items in the Q&A says that the Commission does not "take a position on what a reasonable royalty rate is", but "in the specific circumstances of the case, the seeking of injunctions may unjustifiably distort FRAND licensing negotiations", which implies that Apple's refusal to pay 2.4% of the full handset price is considered a reasonable negotiating position and does not provide Samsung with an excuse to seek what it's really after: sales bans in order to have maximum leverage for comprehensive cross-licensing negotiations involving Apple's non-SEPs.

The Q&A contains a reaction to Samsung's hasty, unilateral withdrawal of its European SEP injunction requests that is less than lukewarm:

"The Commission takes note of Samsung's announcement. This does not alter the Commission's preliminary conclusions about the anti-competitive nature of Samsung's conduct thus far."

This could be paraphrased in four words: too little, too late.

Toward the end, the Commission mentions its "close contact with both the US Department of Justice and the US Federal Trade Commission on issues relating to SEPs" and the fact that it is "investigating a number of other cases relating to SEPs but cannot divulge details at this stage". In this context, the Q&A mentions ongoing formal investigations of Google subsidiary Motorola Mobility's SEP assertions. As I wrote yesterday, I believe Google (Motorola) will also receive an SO soon unless there's a comprehensive EU antitrust settlement that also involves Google's search engine issues. The fact that Motorola asks for "only" a 2.25% royalty (as compared to Samsung's 2.4%) won't be outcome-determinative, I'm sure.

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Microsoft defeats push patent in UK that Google's Motorola is also using against Apple in Germany

Bloomberg reports that Judge Richard Arnold of the UK High Court has today ruled that Google's (Motorola Mobility's) EP0847654 on a "multiple pager synchronization system and method", which is already being enforced against Apple's iCloud email service and over which Google is suing Microsoft (both in Germany), "is invalid and should be revoked".

I've always been skeptical of this patent. The claimed invention was made to address synchronization issues involving pagers and relates to a situation in which a user has different pagers attached to different garments. It's a bit of a stretch to assert it against today's push notification services. If interpreted that broadly, it should be held invalid as Judge Arnold determined today.

The decision comes ahead of a trial scheduled by the Mannheim Regional Court for February 1, 2013, which will be the second trial (after a reopening of proceedings following the first one) in this Motorola v. Microsoft case. There are also two upcoming opportunities (both likely in 2013) for Apple to leverage this ruling in connection with an injunction against the iCloud's push email feature. Motorola won that injunction in early February 2012, started to enforce it only three weeks later, and an Apple motion (brought with the appeals court in Karlsruhe) to stay the injunction was denied in mid-March.

While courts in different European countries decide independently, they do take note of each other's rulings on the same (in)validity and infringement issues. There are no less than three German court hearings (all of them either scheduled for, or about to be scheduled and likely to take place in, 2013) at which today's UK court ruling will be leveraged by Apple and Microsoft:

  • The aforementioned Mannheim trial on February 1, 2013. A first trial over Motorola's attempt to enforce this patent against ActiveSync in connection with Microsoft Exchange, Hotmail and Xbox Live (and products implementing the related services) was held in mid-March 2012, and Microsoft raised a multiplicity of defenses. One of those defenses, prior user rights, persuaded Judge Andreas Voss ("Voß" in German), who also presided over the Apple case involving this patent, to reopen proceedings. The court considered it a possibility that Microsoft already made use of the patented technique, in Germany, before Motorola filed its patent application -- not in a way that would necessarily count as prior art, but which might be sufficient to support a prior user rights defense.

    At the time, Judge Voss said the court had proposed that the parties provide further briefing on this defense and that the court would then issue a ruling without another trial. But just this week I found out from the court that a second trial has been scheduled for February 1. A ruling would then likely come down in late March or in April, and the UK ruling supports Microsoft's motion for a stay pending a parallel nullity (invalidation) proceeding at the Munich-based Federal Patent Court. A stay would only have to be decided if an injunction would otherwise be granted.

    German courts stay infringement proceedings only if they are convinced of a high probability of invalidation. Apple was denied a stay, but Microsoft would be able to point not only to the UK ruling but even more importantly to the fact that the Federal Patent Court's decision would come down not much later.

  • The aforementioned nullity action before the Federal Patent Court will likely also be decided in 2013. The Federal Patent Court's decision can (and absent a settlement will) be appealed by the losing party to the Federal Court of Justice. In that case, the patent, which has an August 1995 priority date, might expire before a final non-appealable ruling on its validity in Germany.

  • At some point in 2013 (I have not yet been able to find out the exact date, and it may not have been set yet) there should also be the hearing at the Karlsruhe Higher Regional Court on Apple's appeal of Motorola's injunction. The fact that the appeals court didn't stay the injunction doesn't mean that Motorola is going to win. The hurdle is reasonably high for German appeals courts to order stays. (It is often underestimated by observers because stays get more attention than denials.) The appeals court could stay the appeal, and simultaneously the enforcement of the existing injunction against Apple, until the end of the nullity (invalidation) action, possibly including its appeal to the Federal Court of Justice.

It is worth noting that the patent which Microsoft defeated today is the only patent over which an Android device maker is presently enforcing an injunction anywhere in the world against Apple. A couple of injunctions that Samsung won in Korea are currently stayed (for the duration of the appeals). HTC never won anything against Apple, and Motorola also won some injunctions over standard-essential patents (SEPs) against Apple (a cellular patent) and Microsoft (two H.264 patents in Germany, one of which has expired), but can't enforce those: Apple is licensed, except that the court has yet to determine the FRAND royalty rate on which the parties can't agree, and Microsoft won an anti-enforcement injunction in the United States that was recently replaced by a summary judgment ruling, both of worldwide effect because Motorola originally offered the relevant patent families on a worldwide basis to Microsoft in a letter sent from the Chicago area to the Seattle area and Microsoft brought a U.S. contract action eight to nine months before Motorola's German lawsuits.

The push notification patent is not essential to an industry standard set by a consortium (and not subject to the FRAND contract case in the U.S.), but there might be a licensing issue because of Google's assertion of this patent against ActiveSync given that Google at some point took an ActiveSync patent license. So did Motorola, a fact that was discussed at the first Mannheim trial.

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Apple to appeals court: 'costs to innovation will be profound' if injunctions become unavailable

Yesterday Apple filed a notice of appeal of Judge Koh's denial of a permanent injunction against Samsung, and as I mentioned in my post on the notice of appeal, it near-simultaneously sent a letter to the United States Court of Appeals for the Federal Circuit in another pending case, the appeal of a preliminary injunction against the Galaxy Nexus smartphone.

In October, a three-judge panel of the Federal Circuit reversed that preliminary injunction, mostly because it held that Apple had failed to meet the "causal nexus" requirement (linking the infringement of specific patent claims to the alleged irreparable harm), but on Monday it turned out that a rehearing en banc (full-bench review) is quite a possibility.

While Samsung is preparing its response to Apple's petition for a rehearing en banc, Apple wanted to reinforce the urgent need for such a rehearing with yesterday's letter. The letter informs the Federal Circuit of Judge Koh's denial of a permanent injunction and the extent to which Judge Koh's reasoning is based on the Federal Circuit's decisions on two previous Apple v. Samsung matters, the appeals of the preliminary injunctions against the Galaxy Tab 10.1 and the Galaxy Nexus.

Apple's letter notes that "a jury found Samsung willfully infringed six Apple patents and diluted Apple's trade dress", but "the district court denied a permanent injunction, relying on the 'causal nexus' requirement announced in [the two aforementioned preliminary injunction appeals]". Apple quotes certain statements from Judge Koh's order acknowledging facts that, per se, weigh in favor of injunctive relief, such as the fact that Apple "practices its invention and is a direct market competitor" to Samsung and that Apple "has likely suffered, and will continue to suffer, the loss of some downstream sales". But, because of the new and very high (if not insurmountable) "causal nexus" hurdle, the court denied the injunction because Apple "would need to show not just that there is demand for the patented features, but that the patented features are important drivers of consumer demand for the infringing products". Even in the public interest context, Judge Koh adopted this logic, finding that "[i]It would not be equitable to deprive consumers of Samsung’s infringing phones when, as explained above, only limited features of the phones have been found to infringe any of Apple's intellectual property".

The final two sentences of the letter explain why it's so key that the Federal Circuit grant Apple's motion for a rehearing en banc and correct or clarify the "causal nexus" requirement:

"This decision highlights the stark consequences of the new 'causal nexus' requirement: despite the jury finding dozens of Samsung products infringe multiple Apple patents, Apple is powerless to prevent further trespass by Samsung. If patentees cannot obtain injunctions against continued infringement by competitors, the strength of patents will sharply diminish, and the costs to innovation will be profound.

Apple respectfully submits that this decision confirms the need for en banc review."

In my opinion, this is a powerful argument in favor of a rehearing. Intellectual property policy is always about striking a balance between legal imitation and illegal copying. If smartphone and tablet computers become immune to injunction requests only because they incorporate large numbers of features, a whole category of patents (with many subcategories) is devalued in the United States, forcing patent holders to rely on injunction-friendlier jurisdictions abroad.

Judge Koh's decision was unprecedented and expected at the same time. Unprecedented because there doesn't seem to be any example of a case in which seven intellectual property rights (six patents, one trade dress) are found infringed, even willfully, but no injunction issues despite the undeniable competitive situation between the parties. Expected because the Federal Circuit's two previous Apple-Samsung rulings, especially the second one (on the Galaxy Nexus), raised the bar for injunctive relief in this industry and most parts of the technology sector (except maybe some segments in which products have very small feature sets).

It's no secret that Judge Koh would rather have Apple and Samsung settle at the earliest opportunity. Their two cases are difficult to manage, and there's the whole political issue of when intellectual property enforcement could be (mis)perceived to constitute an act of protectionism. It appears to me that she always likes to behind others, be it the appeals court or the jury (though I guess she will overrule the jury in some limited ways). The Federal Circuit is in a different position and may be quite receptive to Apple's arguments that injunctions must remain available in the smartphone and tablet computer industry (and industries with similarly multi-functional products) in the interest of innovation. Patents are meant to be an exclusionary right, but the "causal nexus" requirement establishes a compulsory-licensing regime.

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Reexamination requested against another Apple patent Samsung was found to infringe

The United States Patent and Trademark Office (USPTO) has already issued first Office actions concerning three Apple patents that are being asserted against Samsung in district court and at the ITC (in chronological order, the rubber-banding '381 patent, the "Steve Jobs" '949 touchscreen heuristics patent, and the pinch-to-zoom API patent). But those are far from the only Apple patents-in-suit that Samsung, Google (Motorola) and possibly companies fearing future enforcement actions from Apple would like to get invalidated.

Three days ago, the USPTO received an anonymous ex parte reexamination request against five claims of the U.S. (Reissue) Patent No. RE41,922 on a "method and apparatus for providing translucent images on a computer display". The targeted claims -- 29, 30, and 33-35 -- are exactly the ones that an ITC judge recently found Samsung to infringe (that same preliminary ruling, which the ITC staff supports, also held Samsung to infringe the "Steve Jobs" patent, a hardware patent, and a design patent).

Apple also attempted to assert the RE'922 patent against HTC in Delaware. The court denied Apple the right to bring out-of-time infringement counterclaims to an action HTC had started in the summer of 2011, and meanwhile Apple and HTC have settled.

Given that only Samsung is presently being targeted by this patent (though Google's Motorola Mobility also has a reasonable apprehension that it could face an infringement allegation anytime), and in light of the fact that precisely the claims at issue at the ITC are targeted by the reexamination request, it's most likely that Samsung is behind this anonymous filing.

The hurdle for an ex parte request (in ex parte reexaminations, there is only an initial and rather limited participation by the requester in the proceedings, while inter partes reexaminations are closer to litigation between two parties) is that it must raise a substantial new question for patentability. This has been the requirement for some time and wasn't changed under the 2011 America Invents Act (which raised the bar only for inter partes requests to that of a reasonable likelihood of success).

In order to meet this hurdle, the reexamination request points the USPTO to five prior art references it didn't previously consider. Each of those is claimed to render claims 29, 33 and 34 of the challenged patent invalid on its own. In addition, each of those five references is claimed to render claims 30 and 35 obvious if the respective new prior art reference is combined with certain prior art the patent office has previously considered in connection with this patent's complex prosecution history.

These are the five new prior art references:

  1. U.S. Patent No. 5,581,243 on a "method and apparatus for displaying simulated keyboards on touch-sensitive displays" (first named inventor: Daniel Ouellette; application filed in June 1990)

  2. Japanese Patent Publication No. H3-288891 (last name of first named inventor: Matsuo; published in December 1991)

  3. U.S. Patent No. 5,651,107 on a "method and apparatus for presenting information in a display system using transparent windows" (first named inventor: Edward H. Frank; assigned to Sun Microsystems; filed in December 1992)

  4. Japanese Patent Publication No. H2-114319 (last name of first named inventor: Negishi; published in April 1990)

  5. U.S. Patent No. 5,283,560 on a "computer system and method for displaying images with superimposed partially transparent menus" (first named inventor: Joel F. Bartlett; assigned to Digital Equipment Corporation; filed in June 1991)

Next year we'll see if this request for reexamination is granted. It's not the most famous Apple patent because its functionality is not associated with a particular iPhone feature, but the fact that an initial determination by an ITC judge found Samsung to infringe it lends it some significance.

By the way, here's a new Bloomberg article on the question of how much of a bearing multi-year reexaminations have on ongoing infringement proceedings. One of the attorneys quoted in the article is Scott Daniels of Westerman Hattori Daniels & Adrian, an experienced patent litigator and reexamination expert and the author of the Reexamination Alert blog.

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