Monday, December 30, 2013

2013: The year Google raised a FRAND defense (against Intellectual Ventures)

In what will probably be my last post for this year (though it won't be the last post here on a patent case, or one of the last ones, in general as far as my own plans are concerned), I'm going to talk about a couple of FRAND-related court filings that were made earlier this month. Both of them involve Google and its Motorola Mobility subsidiary.

The first one is Google's (Motorola Mobility's) answer to Intellectual Ventures' amended complaint in the Southern District of Florida, in which IV is asserting various wireless patents originally obtained by Nokia. Lo and behold, Google is actually resorting to a FRAND defense against some of IV's patents-in-suit:

"M. Thirteenth Defense and Affirmative Defense

Plaintiffs' claim for damages is limited by FRAND principles since Plaintiffs contend one or more of the patents are essential to the practice of and Plaintiffs or its alleged predecessors in interest to the '793 Patent, the '392 Patent, the '960 Patent, the '771 Patent, the '784 Patent, the '073 Patent, and the '353 Patent participated in the relevant standardization processes and/or submitted a declaration including a FRAND commitment covering one or more of these patents to the relevant standards body and/or otherwise committed to license one or more patents on commercially reasonable and non-discriminatory terms."

Also this month, Google decided to raise this defense against yet another patent-in-suit, and IV did not oppose the related modification, though it does, of course, disagree on substance.

Actually, this kind of FRAND defense was already in Google's answer to the original complaint, filed several months earlier. I admit that I had not paid close attention to this lawsuit. And a FRAND defense that merely relates to a limitation to a "claim for damages" is not a full-fledged, comprehensive FRAND defense of the kind that Apple and Microsoft raised against Motorola. But still it's significant enough that Google feels forced to raise a FRAND defense against IV, and as that litigation unfolds, it may have to be much more specific about how it believes a FRAND licensing pledge to a standard-setting organization benefits third parties.

In its disputes with Apple and Microsoft, Google's Motorola does not recognize third-party beneficiares. In the Microsoft FRAND case in Seattle, its then-counsel made a concession to that effect in early 2012, but on appeal Google is probably going to re-raise this issue. Google is, in fact, disputing the rights of third-party beneficiaries in its cross-appeal of the dismissal of a FRAND contract case brought by Apple in the Western District of Wisconsin.

The Federal Circuit appeal (actually, Google tries to get it transferred to the Seventh Circuit) of that Wisconsin FRAND contract case is the other FRAND case I wish to discuss in this post. On December 19, Apple filed its reply brief in support of its appeal of the dismissal, the public redacted version of which entered the public record the following week (this post continues below the document):

13-12-19 Apple Reply Brief in Appeal of Wisconsin FRAND Dismissal by Florian Mueller

Now Google will get to file a reply brief in support of its cross-appeal, and then briefing will be complete and the appellate hearing will be scheduled. You can find more details in the briefs. I'll just share my high-level observations here.

The most fundamental disagreement between Apple and Google is that Apple argues on appeal, as it did in district court, that a FRAND licensing pledge is enforceable like any options contract in the sense that a beneficiary can obligate the patentee to make an offer on FRAND terms (court-determined if necessary) without the beneficiary (here, Apple) having to make an unconditional commitment to take a license on court-determined terms. Unlike Apple, Microsoft made that commitment in its own dispute with Motorola. That's why Microsoft already has a FRAND rate determination and a jury verdict finding a breach of contract by Motorola in place, while Apple needs help from the appeals court in the form of a remand to district court in order to reach the stage of the Microsoft-Motorola proceedings further down the road (like in 2016 or so). But let's separate tactics from the legal framework. No matter what Microsoft did, Apple may actually be right that it's not necessary to make a commitment of this kind, or to write a blank check, which is how Apple portrays it.

Apple wants to retain its choice to either accept an offer on court-determined FRAND terms or to "continue to fend off Motorola's infringement allegations (which thus far have failed dismally)". As to the dismal failure of Motorola's infringement claims, Apple notes that "[i]n fact, in the course of years of litigation asserting eight declared-essential patents in multiple U.S. jurisdictions, Motorola has never--not once--succeeded in proving that Apple has infringed a valid patent." (That, of course, is yet another data point that calls into question the "wisdom" behind Google's $12.5 billion Motorola deal.)

Whether this appeal will ultimately be adjudicated by the Federal Circuit or by the appeals court Google prefers in this particular case (the Seventh Circuit), Wisconsin state contract law will be the governing law. Of course, a ruling will bear considerable weight in all states that have a similar contract law framework in place as Wisconsin.

I'm not an expert in Wisconsin contract law. I did, however, notice that Apple places more emphasis on Wisconsin law while Google's Motorola makes a whole lot of policy arguments that, according to Apple's reply brief, "amount to arguments to change Wisconsin law". Generally, lawyers emphasize applicable law if they believe it's on their side, or they focus on facts if that seems opportune, but the more they talk about policy, the less confident they are of their positions in those other areas.

Even if (just assuming this now for the sake of the argument) Wisconsin state contract law is indeed on Apple's side, the Federal Circuit will probably still be fairly sympathetic to Google's approach, for policy reasons. Apple's lead counsel in this appeal, Orrick Herrington Sutcliffe's E. Joshua Rosenkranz, has already won one Federal Circuit appeal for Apple against Motorola, recently appeared on the winning track at the hearing in the "Posner appeal", and is virtually certain to revive Oracle's copyright case against Google. But in those other cases, the positions he took were clearly compatible with the Federal Circuit's intellectual property-friendly philosophy, and Google's (Motorola's) position on FRAND royalties was so out of line that Chief Judge Rader of the Federal Circuit repeatedly labeled it as "crazy". In the Wisconsin appeal, Google's position is (apart from certain elements such as its denial of third-party beneficiary rights) nowhere as strikingly unreasonable as in the "Posner case", and Apple's position is nowhere as right holder-friendly as in Mr. Rosenkranz's other smartphone-related Federal Circuit appeals.

It could be that the Federal Circuit concludes that Wisconsin contract law entitles Apple to a FRAND offer from Motorola regardless of whether it pre-commits to its acceptance, with no wiggle room to decide in Motorola's favor based on such notions as Apple being an allegedly "unwilling licensee". But if the Federal Circuit feels that Google's (and Qualcomm's) warnings against a devaluation of FRAND-pledged SEPs can be outcome-determinative, then Apple is in for a really rough ride at the appellate hearing.

It has been pointed out by others, of which I'd like to particularly mention Professor Thomas Cotter, that FRAND determinations factoring in the inevitable uncertainty surrounding the validity and essentiality of declared-essential patents could result in what I would describe as a downward spiral. If there's a probabilistic discount once in the process, that's fine and fair. But if there's a further discount, and if this affects future determinations in which earlier decisions and settlements are used as comparables, then, theoretically speaking, royalty rates could converge with zero.

Motorola argues that Apple would simply use a FRAND determination by a court as a bargaining chip. If, for example, the court says that Motorola is entitled to $1 per device, Apple will then tell Motorola that it can, for instance, get 70 cents now or Apple will continue to litigate, since the $1 offer would be a get-out-of-jail card at any stage of the dispute. And it's true that if Apple could always change mind and accept a $1 offer that a court orders Motorola to make, then it would only be rational for Motorola to do a deal slightly below $1 now. 70 cents would probably be too low, unless Motorola fears that it's unlikely to gain serious leverage through SEP assertions. But 90 cents would probably be just a rational decision. Now, if the court determination of $1 was right, but if Motorola accepted 90 cents for the reason I just outlined, then this would affect future FRAND rate-setting decisions. Future rate-setters (courts or arbitrators) would see that a court thought $1 was fair, but they would also see that Motorola settled for 90 cents. And if you have a sequence of rate-setting decisions influenced by this, then it becomes increasingly unlikely that a future court or arbitrator would, all other things being equal, attach a $1-per-unit valuation to Motorola's portfolio.

All I'm saying here is that the policy concerns expressed by Google in this context aren't all unreasonable. I've criticized a number of Google positions, mostly on FRAND. In this particular case here, while I see potential merit in Apple's theory of an enforceable options contract, I can't say that Motorola and Qualcomm (and others) don't raise a legitimate policy concern.

From the Federal Circuit's vantage point, looking at the record of this case and of related cases, neither of the parties nor the district judge make a perfect impression. Judge Barbara Crabb in Wisconsin was pretty much on Apple's side and then became a bit emotional about Apple's "no more than $1" position. She initially wanted to dismiss Apple's case even without prejudice, only to realize after further thought that this was too extreme. That doesn't look great. But Apple's behavior before the district court can be perceived (rightly or wrongly) as somewhat arrogant, also in light of the fact that other litigants, such as Microsoft, did commit beforehand to take a license on court-determined terms, which is also what the Federal Trade Commission deemed reasonable in the Google-Motorola FRAND antitrust case. But Google's Motorola also has its credibility problems. It has notoriously taken "crazy" positions on FRAND, it's known to have drawn antitrust scrutiny in the U.S. and Europe, and it's presumably not lost on the Federal Circuit that Google is the driving force behind a massive anti-patent (and generally IP-eviscerating) push in Washington DC and elsewhere.

All in all, this looks like the most difficult one of Mr. Rosenkranz's smartphone-related appeals to win, unless Wisconsin law is as firmly on Apple's side as he argues. Should it come down to policy considerations, I would bet on Google this time around.

If you'd like to be updated on the smartphone patent disputes and other intellectual property matters I cover, please subscribe to my RSS feed (in the right-hand column) and/or follow me on Twitter @FOSSpatents and Google+.

Share with other professionals via LinkedIn:

Nokia wins German patent injunction against all HTC Android devices including the One series

The New Year's Eve fireworks kicked off a day early at the Munich I Regional Court, where Judge Dr. Matthias Zigann just handed Nokia a Germany-wide patent injunction against all HTC Android devices (including the One series) that infringe EP1148681 on a "method for transferring resource information" by allowing end users to connect two HTC devices directly over NFC or Bluetooth (but not over WiFi or the Internet) to transfer resource information such as a URL. The patent is not standard-essential, meaning that Nokia does not have any FRAND licensing obligations.

HTC can and undoubtedly will appeal this ruling. But in the meantime, unless HTC manages to convince the appeals court right away that it is more likely than not to succeed with its appeal (a reasonably high hurdle), Nokia can enforce this injunction (including a recall of infringing devices from resellers and commercial users) on a provisional basis by posting a 400 million euro ($550 million) bond or giving security to the same amount. This is a permanent -- not preliminary -- injunction following an early first hearing held in October 2012 and a full trial held a few months ago (which I did not attend). But enforcement is provisional until all appeals are exhausted.

Nokia has enough cash to be able to afford the provisional enforcement of this injunction. The purpose of the bond is just to enable HTC to recover wrongful-enforcement damages should it prevail at the end of the proceedings and Nokia's financial condition deteriorate. At that stage, HTC would have to prove any damages it claims, and since it could always just remove the patented feature from its devices, it would have to convince the court (in that scenario) that it lost a certain amount of sales because of the reduced marketability of its products to German consumers. This is hardly going to deter Nokia from enforcement. Nokia has issued numerous statements since the start of its multijurisdictional infringement litigation campaign against HTC (in May 2012) that it seeks to put an end to HTC's alleged -- and repeatedly-proven -- infringement of Nokia's intellectual property.

Google realized during the course of this litigation that this Nokia patent is of concern to the entire Android ecosystem. (Earlier today I found out that Nokia is also in Android-related patent licensing discussions with Google's Motorola Mobility.) In addition to HTC's nullity complaint (invalidation action) challenging this patent before the Federal Patent Court of Germany, Google also brought a nullity complaint -- but too late to be considered by the Munich I Regional Court in connection with HTC's motion to stay the case pending those nullity cases. Under German law, a lawsuit is "rechtshängig" (pending) only after the complaint has been served by the court (which doesn't act before receiving an advance on court fees) on the defendant. Google acted too late, which is typical: it took Google (under a different CEO, though) quite long before it started to respond to the infringement actions brought against Android by Apple, Microsoft and other patent holders. Once again, it acted too late. Google's nullity complaint appears to involve additional invalidity contentions and may ultimately succeed -- but it wasn't legally pending at the time of the infringement trial, and the court found that HTC's declaration of its intent to add the same additional invalidity theories and prior art references to its own (pending) complaint was also too little, too late.

Originally, Nokia was alleging that a transfer of resource information over WiFi also fell within the scope of the patent-in-suit. It withdrew that part of the complaint ahead of the ruling. Since NFC and Bluetooth played a far greater role in this case at any rate, the court exercised its discretion to impose 100% of the court fees and of the recoverable part of Nokia's legal fees on HTC.

Ten days ago, Nokia won another Munich injunction against HTC, from a different panel of judges. Today's injunction was issued by the 7th Civil Chamber (Presiding Judge: Dr. Matthias Zigann), while the pre-Christmas ruling was handed down by the 21st Civil Chamber (Presiding Judge: Andreas Mueller). The earlier one did not relate to the HTC One according to a statement by HTC. In March Nokia had already won an injunction from another German court, the Mannheim Regional Court, but HTC simply removed a certain power-saving feature from its devices and kept selling its products in Germany. All three German Nokia injunctions against HTC were won by lawyers from the Dusseldorf office of the Bird & Bird firm.

Another Nokia v. HTC decision by Judge Dr. Zigann's court is scheduled for January 9, 2014.

Nokia is suing HTC in seven countries (U.S., UK, Germany, France, Italy, Netherlands, Japan) on three continents (North America, Europe, Asia).

In the U.S., the ITC, a trade agency with quasi-judicial powers, is currently reviewing a preliminary ruling that held HTC to infringe two Nokia hardware patents. Google, Verizon and Sprint, as well as other parties, have asked the ITC not to issue an import ban, citing public interest grounds, or to at least give HTC 12 months to modify the products it imports into the U.S. market. But Nokia argues that the ITC has already ordered import bans against smartphone and tablet computer makers with far greater market share, and counters arguments that injunctive relief should not issue against multifunctional products over patents covering single, minor features by saying that if the feature is minor, HTC should simply remove it.

In the UK, Nokia recently won an injunction, which was stayed by an appeals court for the duration of the appellate proceedings. The hurdle for such a stay is substantially lower in the UK than in Germany, where an infringement holding generally entitles patentees to injunctive relief without any equitable discretion.

Nokia's patent enforcement against HTC clearly has momentum now. The injunctions it has won so far have not given it decisive leverage. And it could be that HTC will decide to simply remove the resource transfer feature in Germany. But sooner or later, HTC will end up sending patent royalty checks to Finland.

So far Nokia's enforcement focuses on devices rather than the Android platform or Google's services, but a Nokia v. HTC lawsuit in Dusseldorf, Germany, involves Google Maps and Google Navigation, two services that are key to Google's overall strategy.

[Update] Nokia has released a statement, suggesting that HTC make it its first New Year's Resolution for 2014 to stop infringing:

"Nokia is pleased that the Regional Court in Munich, Germany has today ruled that any HTC product using Bluetooth or NFC connections infringes Nokia's patent EP 1 148 681, which covers the transfer of network resource information between mobile devices.

This judgment enables Nokia to enforce an injunction against the import and sale of all infringing HTC products in Germany, as well as to obtain damages for past infringement. This follows another ruling from the same court ten days earlier, which found that HTC products infringed Nokia's USB patent EP 1 246 071 and granting Nokia right to an injunction and damages against products infringing that patent.

Nokia began its actions against HTC in 2012, with the aim of ending HTC's unauthorised use of Nokia's proprietary innovations and has asserted more than 50 patents against HTC. During 2013, Nokia believes it has demonstrated beyond doubt the extent to which HTC has been free riding on Nokia technologies, with HTC found to infringe seven Nokia patents in venues including the Regional Courts in Mannheim and Munich, Germany, the UK High Court and the US International Trade Commission. HTC’s first New Year’s resolution for 2014 should be to stop this free riding and compete fairly in the market."


If you'd like to be updated on the smartphone patent disputes and other intellectual property matters I cover, please subscribe to my RSS feed (in the right-hand column) and/or follow me on Twitter @FOSSpatents and Google+.

Share with other professionals via LinkedIn:

Nokia and Google's Motorola Mobility have patent licensing issues to sort out -- details unknown

While I commented on a couple of topics last week (Google's declaratory judgment action against Rockstar and Apple's renewed motion for a U.S. permanent injunction against Samsung), I haven't checked on the dockets of most of the cases I follow in ten days. I'm now catching up with developments, and the first item I have identified as newsworthy is that Nokia and Google's Motorola Mobility are engaged in an unspecified type of patent licensing discussions.

On December 20, 2013 (the Friday before Christmas), Nokia filed a response to Google's report on the first (mandatory) settlement conference relating to Nokia's second ITC complaint against HTC. In most cases the parties to an ITC investigation or federal lawsuit agree on how to represent the status of their talks to the agency or court. Here, Nokia takes issue with Google's claim that "Nokia continues to refuse to proceed with a settlement conference with Google". Google is only an intervenor in that ITC investigation, not a defendant, so there is nothing between the parties to settle in a strictly formal sense -- but Nokia wanted the ITC to know that its executive and its counsel were nevertheless willing to listen to whatever Google might have to propose in terms of a contribution to a resolution of the infringement issues surrounding Android-based devices.

Nokia attached to its filing with the ITC (which entered the public record during Christmas week) the following paragraph from a December 3, 2013 email from Nokia's counsel to Google's (click on the image to enlarge or read the text below the image):

"If Google wishes to proceed with its requested meeting, Nokia will do so, as we have repeatedly told you. Indeed, Nokia's Robert Gray explained in his October 25, 2013, letter to Motorola Mobility Holdings, Inc.: 'If Google is in a position to end the unauthorized use of Nokia patented technology in Android products, [Nokia] would welcome independent discussions with Google on that basis.' Google has not taken Nokia up on that offer. Mr. Gray (or someone on his team) remains available to meet in Finland before the settlement conference deadline, if Google so desires."

Mr. Gray is a seasoned licensing executive. He has been mentioned in previous settlement reports filed with the ITC in connection with the Nokia-HTC dispute.

Nothing is known about Nokia's talks with Google's wholly-owned subsidiary Motorola Mobility at this stage except for what the paragraph quoted above reveals. That is enough to make it a fact that Nokia and Google's Motorola have some patent licensing-related conversations going, and the alleged infringement of Nokia patents by Android-based devices is apparently the reason (or one of the reasons) for these talks, as the quoted sentence indicates.

What was already known before this revelation is that Nokia and Motorola concluded various patent license agreements in the past. When Nokia was a new entrant, it had to pay substantial royalties to Motorola. Now, Nokia has far stronger patents (but it will be hard for Motorola to find Nokia products against which it could assert any patents of its own).

When Microsoft explained the rationale behind its acquisition of Nokia's wireless devices business in early September, it mentioned that "Nokia is also conveying [to Microsoft] rights under its agreements with IBM, Motorola Mobility, and Motorola Solutions", giving Microsoft "the benefit of attractive royalty arrangements Nokia negotiated".

But patent license deals aren't necessarily comprehensive. The Nokia-Motorola deal may very well be limited to standard-essential patents (SEPs), considering that Nokia didn't license its non-SEPs broadly in the past. And no matter what the scope of the deal is, it presumably has a limited term as well, which could be another reason for these parties to hold talks about future patent licensing arrangements.

For Google it's probably a "no go" to pay patent royalties to Nokia with respect to Motorola Mobility's Android devices. By doing so, Google would officially recognize that the entire Android ecosystem owes Nokia license fees. But if there are infringements, then Nokia will, if necessary, find ways to enforce its rights. At the end of the day, even Google's Motorola may end up having to pay.

Earlier this month it became known that Nokia is now suing HTC over Google Maps as well, which is a wider IP issue that goes beyond Android.

I'll probably have some more Nokia v. HTC news later. The Munich I Regional Court scheduled the announcement of a related ruling for this afternoon. Ten days ago Nokia already won a Munich patent case against HTC, but according to HTC, its One flagship series of smartphones is not affected by that injunction.

If you'd like to be updated on the smartphone patent disputes and other intellectual property matters I cover, please subscribe to my RSS feed (in the right-hand column) and/or follow me on Twitter @FOSSpatents and Google+.

Share with other professionals via LinkedIn:

Friday, December 27, 2013

Impact assessment of Apple's renewed motion for U.S. permanent injunction against Samsung

On November 18, 2013 the United States Court of Appeals for the Federal Circuit revived Apple's bid for a permanent patent injunction against Samsung's Android-based devices with respect to three multitouch software patents (rubber-banding, tap-to-zoom-and-navigate, and pinch-to-zoom API), while affirming Judge Lucy Koh's denial of injunctive relief with respect to the asserted design patents. An appellate opinion is not the end of the appellate proceedings, however. Samsung could have tried to delay the process through a petition for a rehearing (and, theoretically, a petition for writ of certiorari with the Supreme Court). But Samsung didn't do any of that, and as a result, the Federal Circuit yesterday (December 26, 2013) issued the formal mandate to the United States District Court for the Northern District of California (Judge Koh's court).

Still on the same day, Apple brought (as it had announced in a motion following the recent damages retrial) a renewed motion for a permanent injunction, requesting that another injunction hearing be held as early as January 30, 2014 (this post continues below the document):

13-12-26 Renewed Apple Motion for Permanent Injunction Against Samsung by Florian Mueller

The fact that Samsung -- a notorious "staller" of Apple's patent infringement lawsuits -- refrained from exhausting all options to delay the process shows that it's not scared to death by the prospect of Apple obtaining an injunction on remand. On a similar note, the fact that Apple did not keep on fighting for an injunction over its design patents also indicates its strategic priorities.

The underlying issue -- what the proper standard for a "causal nexus" between a proven infringement and an alleged irreparable harm to the prevailing right holder should be -- is and remains extremely important, and Apple made some headway in this regard. This matters, but mostly with a view to a future Apple request for an injunction over whatever patents it may prevail on at the trial in its second California litigation with Samsung (scheduled to begin on March 31, 2014), where some more impactful patents are at issue.

It's important to focus on the asserted patents, not the accused products. Obviously, the products that are named in an April 2011 lawsuit (such as the Galaxy S II) are no longer commercially relevant. But Apple is seeking an injunction that would also cover "any other product not more than colorably different from an Infringing Product as to a feature found to infringe" (which is consistent with the Federal Circuit's TiVo v. EchoStar opinion).

Here's my patent-by-patent take on the parameters and potential impact of the remand proceedings:

  • The '163 tap-to-zoom-and-navigate patent is too narrow to have any practical commercial relevance. As I explained in my October 2012 workaround analysis, it does not cover all tap-to-zoom functionality: it applies only if the user can, after using tap-to-zoom, bring a different section of a document to the center with another tap. The enforcement of an injunction over this particular aspect of Apple's tap-to-zoom gesture wouldn't be noticed by Samsung's customers, at least not to the extent that anyone's purchasing decisions would be affected in the slightest.

  • More than six months ago the United States Patent and Trademark Office (USPTO) affirmed the key claims, including the claim asserted in this action, of Apple's '381 rubber-banding ("overscroll bounce") patent. Samsung stopped providing that functionality to end users roughly two years ago, as a result of Apple's patent enforcement. If Apple was unable in any given major market to enforce this patent, I believe Samsung would re-enable the feature because it really does make a difference, in a subconscious but nevertheless important way (the overscroll effect avoids the situation in which the user instinctively feels that the device is not responding and presses harder) -- and it's a nice visual effect. This is again not the kind of feature that would influence purchasing decisions all by itself, but all other things being equal, I would certainly prefer a touch device that does have rubber-banding, and a multiplicity of such features would have an important effect on the user experience and the perceived quality of products (while even 100 patents of the '163 kind wouldn't really matter).

    With respect to rubber-banding, Apple certainly has a point when it says that "[a]bsent an injunction, Samsung could begin again to sell infringing products" (which is where the "colorably different" issue comes into play).

  • The '915 pinch-to-zoom API patent raises the most interesting issues, and if Apple obtains a permanent injunction over this one, we may actually see a subsequent contempt proceeding in which Samsung would have to defend its purported workaround against claims by Apple that it is not a workaround but still an act of infringement.

    The scope of this patent may be just as narrow as that of the '163 patent if Samsung's workaround is indeed a workaround, a fact that is in dispute for the time being. Last year, Samsung claimed that it had a workaround in place that provided end users with the same functionality but nevertheless steered clear of infringement of the '915 patent. So people would get pinch-to-zoom in the form in which they know it, wouldn't notice anything, but the inner workings would somehow be non-infringing. It didn't really disclose what this workaround would look like, and Apple believed that Samsung was still going to infringe. In yesterday's motion, Apple says it still "believes that Samsung continues to infringe at least the '915 patent with its current products because Samsung has not disclosed a designaround that avoids infringement of that patent".

    Situations like these give rise to contempt proceedings after issuance of an injunction (which can also result in appeals). In that event there would be three types of outcomes. The court might clear Samsung's workarounds, in which case Apple's 915 patent would prove useless. The court might find that Samsung still infringes, in which case Samsung's alleged workaround would turn out to be futile and Samsung would actually have to remove the pinch-to-zoom feature from its products. Or the court might find that there could still be an infringement, but should there be one, it would be so very different from the infringement pattern established in this case that Apple would have to bring a new infringement lawsuit to go after that one.

    But we may never get there anyway because the validity of the '915 patent is so doubtful. An examiner at the USPTO's Central Reexamination Division has rejected all claims of this patent, and (also yesterday) Apple appealed that decision to the USPTO's Patent Trial and Appeal Board (PTAB):

    13-12-26 Apple Notice of Appeal to PTAB ('915 Reexam) by Florian Mueller

    Samsung simply said the opposite of the truth when it claimed last month that this appeal was Apple's only option left (in an attempt to have the limited damages retrial stayed in the midst of jury deliberations). I wrote in my commentary back then that "it's rather likely that an appeal will be necessary in the end", and it did prove necessary. It's just that, contrary to Samsung's representations at the time, Apple theoretically had other options to dissuade the examiner from rejecting the patent.

    By exhausting all appeals, Apple can keep the patent technically alive until at least mid-2017 (probably 2018). But at this stage, the patent is of highly dubious validity. If I were a judge having to decide on an injunction motion involving this patent, I would try hard to find a way to avoid that this probably-invalid patent does any harm to Samsung. And I guess Judge Koh will try, too. But her problem is that this is a motion for a permanent (post-trial) injunction, where there is no assessment of the likelihood of a particular outcome. Maybe she could try to somehow give consideration to the doubtful validity of the patent in the balance-of-hardships context, but again, it's difficult. Samsung does, however, have a pretty good chance of obtaining a stay -- and I am convinced that it is entitled to a stay over this patent.

    Theoretically, the proceedings could be stayed with respect to this patent even before an injunction issues. But then the whole case including the damages part would be stayed, and this would delay forever the appeal (on the merits) that last month's limited damages retrial was meant to pave the way for. So it would actually make more sense to grant Apple an injunction over this patent but to also grant a Samsung motion for a stay of its enforcement. This way there would be a final and appealable ruling on the merits, but unjust harm would be avoided.

    Judge Koh could grant an injunction and subsequently grant a Samsung motion for a stay of enforcement. This would not be illogical at all under the circumstances in this case. If Judge Koh denied a stay, Samsung could ask the Federal Circuit to grant one. Whoever grants Samsung a stay, I repeat that in my opinion it's absolutely entitled to one. An enforceable injuntion over the '915 patent at this stage would be nothing but outright injustice.

If you'd like to be updated on the smartphone patent disputes and other intellectual property matters I cover, please subscribe to my RSS feed (in the right-hand column) and/or follow me on Twitter @FOSSpatents and Google+.

Share with other professionals via LinkedIn:

Wednesday, December 25, 2013

Google tries to get Rockstar's Android lawsuits transferred out of the Eastern District of Texas

On Halloween 2013, the Rockstar Consortium -- the winner of the 2011 Nortel patent auction -- brought patent infringement actions against Google and seven of its Android hardware partners (Samsung, Huawei, ZTE, LG, HTC, Pantech, and ASUSTeK) in the Eastern District of Texas. The lawsuit against Google itself involves seven "associative search engine" patents, while the seven patents-in-suit in the actions against Android OEMs cover a diversity of hardware and software features.

So far, no defendant has answered to the complaint. They were all granted extensions.

On Monday (December 23), Google filed a declaratory judgment lawsuit in the Northern District of California against Rockstar and its MobileStar Technologies subsidiary over the seven patents-in-suit in the Android OEM cases (this post continues below the document):

13-12-23 Google N.D. Cal. DJ Action Against Rockstar Consortium by Florian Mueller

The complaint contains a lot of rhetoric, accusing Rockstar of having "placed a cloud on Google's Android platform" and threatening "Google's business and relationships with its customers and partners, as well as its sales of Nexus-branded Android devices". One tidbit previously unknown to me is that "MobileStar [the subsidiary that is a co-plaintiff in the Rockstar suits against Android device makers) was formed for litigation one day before Rockstar filed its lawsuits against Google's customers". Other than that, it's the usual anti-troll rhetoric, blaming Rockstar's shareholders, with a particular focus on Apple, for the fact that Google's aggressive pursuit of the Nortel patent portfolio (as a matter of fact, Google won the "stalking-horse bid" in 2011) forced other industry players to join forces in order to clear the market of these patents. If not for Google's aggressive pursuit, these patents would have sold at a fraction of the price.

Google alleges that "Rockstar intends the Android OEM Actions to harm Google's Android platform and disrupt Google's relationships with the Android OEM Defendants". Google does not adduce any particular evidence at this stage; it just refers to an Ars Technica article.

I've previously commented on Google's hypocrisy in connection with patents, such as in an op-ed published last month on The Hill's Congress Blog, entitled "Sue when you're winning".

Presuambly none of the defendants wants the liability issues and remedies to be decided in the Eastern District of Texas. But in order to move the Rockstar Lawsuits out of Texas, they need to present a superior alternative. We'll see soon whether they all advocate that their lawsuits be moved to Northern California, where they could and would be consolidated with Google's declaratory judgment action, or whether some or all OEMs additionally bring declaratory judgment actions in districts where their U.S. subsidiary are based.

Rockstar will presuambly request that Google's DJ action be transferred to the Eastern District of Texas and consolidated with the earlier-filed infringement cases.

Quinn Emanuel filed the Northern California action on Google's behalf. Quinn Emanuel has already done, and continues to do, a lot of work for Android device makers (especially Samsung, HTC and Motorola). It remains to be seen whether all defendants agreed that QE should lead their collective defense, or whether some of them have other preferences.

The case was filed with the San Jose division (that's the one closest to Google's Mountan View HQ) and automatically assigned to Magistrate Judge Paul S. Grewal, known for his work on discovery disputes (including the "Patentgate" affair, which also involves QE) on the Apple v. Samsung cases Judge Lucy Koh is presiding over. If any of the parties declines to proceed before a Magistrate Judge, the case will have to be assigned to a United States District Judge. I'm sure Judge Grewal could handle a case like this just as well as any district judge, but chances are someone will want the case reassigned.

If you'd like to be updated on the smartphone patent disputes and other intellectual property matters I cover, please subscribe to my RSS feed (in the right-hand column) and/or follow me on Twitter @FOSSpatents and Google+.

Share with other professionals via LinkedIn:

Friday, December 20, 2013

Nokia wins German injunction against HTC's Android-based devices over key USB-related patent

The Nokia patent noose keeps tightening around HTC's neck:

Judge Andreas Mueller ("Müller" in German), the Presiding Judge of the 21st Civil Law Chamber of the Munich I Regional Court, just announced a ruling in Nokia's favor. The court granted Nokia an injunction against HTC's Android-based devices infringing EP1246071 on a "method of configuring electronic devices", a key USB-related (but not standard-essential) patent.

HTC did not have much of an infringement defense, and failed to persuade the court from staying the infringement proceedings pending a parallel nullity (invalidation) action against this patent pending before the Federal Patent Court of Germany. I predicted this outcome based on how the trial had gone in September.

As an Android user I make use of the patented functionality on an almost daily basis. The patent does not cover all USB connections, but it does cover the automatic configuration of an appropriate driver on a desktop PC when a USB connection is established. I use a USB cable to connect my phone (presently, a Galaxy Mega 6.3) to my Windows desktop. Windows then offers several choices for the purpose of the connection. Most of the time I just want to access files (photos etc.) stored on the phone, using it like an external USB storage medium. Alternatively, I could run a synchronization program. Or a user might want to use a smartphone as a USB wireless modem. These different use cases require different device drivers, and depending on my choice, the right one will be activated (and, if necessary, installed in the first place). That's what this patent is all about. I can also select a default connection type, which will then be activated automatically.

Nokia did not accuse any Windows Phone devices in this action, which are presumably licensed by extension of Microsoft's patent arrangements with Nokia.

Even though this patent is of concern to all Android device makers, Google did not intervene.

Nokia can enforce this ruling on a provisional basis during the appellate proceedings. In order to enforce all parts of the ruling (including a recall of infringing devices from resellers), Nokia has to post a bond or make a deposit of approximately 50 million euros ($68 million).

Of all German patent judges I know, Judge Mueller and his panel are the most difficult ones to convince of an infringement theory. Other parties failed to win anything from that court, making Nokia's achievement all the more significant.

For formal reasons (not all of its claims succeeded), Nokia has to pick up 40% of the court fees. But this is strategically irrelevant. What Nokia needs is leverage over HTC in a major market (such as Germany) so as to obtain a settlement on its preferred terms. Nine months ago Nokia (represented by the same winning lead counsel, Bird & Bird's Christian Harmsen) already won a German injunction against HTC, but HTC just removed a feature and kept selling. It can also work around this patent, but the attractiveness of its Android devices to German consumers would likely be adversely affected. HTC can also ask the appeals court (the Munich Higher Regional Court) to stay enforcement, but such stays are granted in Germany only if a defendant demonstrates that it is more likely than not to succeed on appeal.

An injunction Nokia recently won against HTC in the UK over a hardware patent was stayed by the England and Wales Court of Appeal, but UK courts apply an equitable standard that is different from the German approach to injunctions as a remedy at law (i.e., pretty much an automatic consequence of a finding of infringement).

Last week the United States International Trade Commission (USITC, or just ITC) decided to conduct a routine review of a preliminary ruling that held HTC to infringe two Nokia patents and could lead to a U.S. import ban.

Nokia has more than 50 patents in action against HTC in seven countries on three continents. Most recently, a Nokia lawsuit against HTC in Paris, France and a complaint in Dusseldorf, Germany targeting Google Maps and Google Navigation became known.

[Update] Nokia has provided the following statement on the decision:

"Nokia is pleased that the Regional Court in Munich, Germany has today ruled that a number of HTC products infringe Nokia’s patent EP 1 246 071, which covers USB functionality in mobile phones.

Today's judgment is another significant milestone in our on-going dispute with HTC, enabling Nokia to enforce an injunction against the import and sale of all infringing HTC products in Germany, as well as to obtain damages for past infringement. This patent is also already in suit against HTC in the UK.

Nokia began its actions against HTC in 2012, with the aim of ending HTC’s unauthorised use of Nokia’s proprietary innovations and has asserted more than 50 patents against HTC in France, Germany, Italy, Japan, the Netherlands, UK and US. During 2013, HTC has been found to infringe Nokia patents in venues including the Regional Courts in Mannheim and Munich, Germany, the UK High Court and the US International Trade Commission."


[Update2] On Sunday, HTC told Focus Taiwan that its One series of smartphones was not found to infringe and is, therefore, not affected by the Friday ruling. I had mentioned that Nokia had not succeeded on all of its claims (hence had to pick up 40% of the fees). The finding of non-infringement by HTC's flagship phone is probably the explanation. I attended the announcement of the decision, but the detailed reasoning was provided only to parties' counsel, not to the general public. [/Update2]

If you'd like to be updated on the smartphone patent disputes and other intellectual property matters I cover, please subscribe to my RSS feed (in the right-hand column) and/or follow me on Twitter @FOSSpatents and Google+.

Share with other professionals via LinkedIn:

Google Maps and Navigation under patent fire from Nokia: lawsuit revealed by Google itself

TechCrunch apparently quoted a first-rate (unnamed) source more than six months ago, which told the popular blog that "Nokia has held off on a suit against Nokia for Google Maps for several years just waiting for the right time to approach with an overall suit covering Android and Maps". Nokia has recently begun to attack Google Maps and Google Navigation in Germany, a filing by Google with the ITC reveals.

Google will have to sort out patent licensing issues with Nokia at some point. That is also the opinion of an Administrative Law Judge at the ITC, who recently suggested that Google participate in Nokia-HTC settlement talks. At this stage I'm still unaware of a Nokia v. Google lawsuit per se, but if the licensing situation remains unresolved, then I agree with the anonymous source quoted by TechCrunch that such confrontation will be inevitable.

One of dozens of exhibits to a filing Google made this week with the ITC is a U.S. discovery application (for use in foreign proceedings) that Nokia filed on October 15, 2013 with the United States District Court for the Northern District of California (Google's home court). It states specifically that Nokia filed a new patent lawsuit against HTC in Dusseldorf, Germany, between an earlier U.S. discovery application (filed on August 8, 2013) and that new application, and that this new lawsuits "relates to navigation technology [...] including the use of Google Maps and Google Navigation in HTC devices sold in Germany" (click on the image to enlarge):

The patent Nokia is asserting in that German lawsuit is EP0766811 on an "electronic navigation system and method". The patent has a June 1994 priority date, proving that Nokia was working on mapping and navigation software years before Google was even founded.

Claim 1 covers the following basic concept:

1. A method of transmitting route directions in a compact form, comprising the steps of:

(a) generating a first set of maneuver arms for providing a graphical representation of a calculated route to be taken by a vehicle through an intersection and geometric representations of a plurality of segments of roads to be traveled about an intersection along the route, wherein the intersection is an origin, and said representations of each of said plurality of segments of roads starts at the origin and radiates outward to an endpoint Xi, Yi to approximate the angles at which the roads approach the intersection, to depict a first intersection on a display, each maneuver arm of the first set of maneuver arms being represented by at least one endpoint;

(b) generating a second set of maneuver arms to depict a second intersection on a display, each maneuver arm of the second set of maneuver arms being represented by at least one endpoint;

(c) comparing the proximity of the first intersection and the second intersection and, if the first intersection and the second intersection are within a predetermined range of each other, combining the first set of maneuver arms with the second set of maneuver arms to produce a combined set of endpoints to depict the first set of maneuver arms and the second set of maneuver arms on a common display; and

(d) transmitting the combined set of endpoints to a remote unit in electromagnetic form.

Nokia obviously has many more patents in this area, and especially patents that have a longer remaining life span. This Dusseldorf action over a patent that will expire relatively soon looks like a warning shot for Google. Nokia is already targeting various Google technologies in many of its lawsuits against HTC. Some of the HTC cases are about hardware patents while others cover Android operating system functionality, features that Android device makers typically add to Android to make their gadgets attractive to consumers, and several Nokia patent assertions prior to this one already related to Google's closed-source Android apps and related services as well as Google's VP8 video codec format.

In the California discovery case, Nokia is seeking source code and other documents relating to the accused functionalities, i.e., Google Maps and Navigation. Google is probably afraid that such discovery will enable Nokia to develop additional infringement theories to bring more lawsuits.

If you'd like to be updated on the smartphone patent disputes and other intellectual property matters I cover, please subscribe to my RSS feed (in the right-hand column) and/or follow me on Twitter @FOSSpatents and Google+.

Share with other professionals via LinkedIn:

Standard-essential patent troll InterDigital keeps failing: ITC clears Nokia, Huawei, ZTE, soon LG

At close of business on Thursday, the United States International Trade Commission (USITC, or just ITC) handed down its final ruling on InterDigital's July 2011 complaint against Nokia, Huawei, and ZTE. The Commission, the six-member decision-making body at the top of the U.S. trade agency with quasijudicial powers, affirmed the bottom line -- a finding of no violation whatsoever by these three defendants -- of a June 2013 preliminary ruling by an Administrative Law Judge (ALJ).

Two aspects of the ITC's announcement make things even worse for the infamous standard-essential patent (SEP) troll:

  • To the extent that the Commission overruled the ALJ at all, it apparently adopted narrower claim constructions. InterDigital's official statement calls the ITC's claim constructions "extremely disappointing" and vows to appeal.

  • For a ruling with respect to a fourth defendant, Korea's LG Electronics, the ITC set a February 17, 2014 target date, suggesting that it's pretty much a no-brainer to dismiss InterDigital's claims against LG. InterDigital's assertions against LG (a fourth defendant the troll tried to add a little later) were referred to mediation in a decision reversed by the Federal Circuit, resulting in a remand. Recently there have been some filings in which the Office of Unfair Import Investigations (OUII, commonly referred to as the "ITC staff"), LG and InterDigital made proposals for the procedural implications of the remand. The fact that InterDigital's patents-in-suit have now been held by the ITC not to be standard-essential, LG is presumably in the clear as well. (Even if it wasn't, it could easily work around those patents-in-suit that weren't deemed invalid anyway.)

InterDigital is far from the only company suing over allegedly-essential patents that turn out to be invalid or, if valid, too narrow to be truly essential. The failure rate of SEP assertions by the likes of Samsung and Google's Motorola Mobility is also sky high, though InterDigital is particularly bad. Many SEP holders including InterDigital and the two aforementioned companies seek to benefit from overdeclaration: they declare their own patents essential during the standardization process but courts of law and other fora (such as the ITC) overwhelmingly reach other conclusions. Nevertheless those SEP holders demand royalties based on the assumption that pretty much all of their declared-essential patents are actually essential to practicing a standard.

The only way to prevent that overdeclaration gets rewarded is to fight SEP hold-up. Those who argue that SEP disputes should be referred to opaque arbitration proceedings (or else the SEP holder should be free to seek injunctions, including ITC import bans) are wrong because it's absolutely key that courts and other public fora construe the claims of allegedly-essential patents and make (in)validity determinations. If the parties to this ITC investigation (and possibly any other parties, but let's just focus on those now) had all agreed to separate arbitration proceedings, InterDigital could have tried in four separate cases (Nokia, Huawei, ZTE, LG) to argue that the related patents are valid and actually essential. In arbitration, no final, public and binding determination would have been made -- there's only an assessment, and the result of that assessment would and could have been used only in the arbitration proceeding in which it was performed.

InterDigital's hold-up strategy raises another issue, and I guess that's why it is (and in my view, absolutely should be) in antitrust trouble in China: while its U.S. patent assertions are weak, as yesterday's decision once again shows, its patent holdings are even weaker in the rest of the world. So InterDigital tries to leverage the threat of a U.S. import ban (which is much less of a threat since the Presidential veto in the Samsung-Apple case) in order to extract worldwide supra-FRAND royalties as Nokia and Huawei told the ITC earlier this year. If this is the reason (or one of the reasons) for which Chinese antitrust regulators are investigating InterDigital, then I totally agree with the Chinese. No antitrust enforcer should tolerate that a SEP holder distorts competitions in country C (here, China) by threatening to exclude a defendant (here, Huawei or ZTE) from a market U (here, the U.S.) unless the defendant accedes to the SEP holder's royalty demands on a global basis. I think the European Commission should also take action against InterDigital because it's trying to distort competition in Europe in the same way as it is doing with respect to China.

Earlier this week InterDigital claimed that its executives couldn't go to a meeting in China because antitrust regulators didn't guarantee that they wouldn't be arrested. I don't know what China's competition enforcers told InterDigital's local counsel, but I doubt that InterDigital benefits in any way from telling this story (true or untrue). There is an increasing number of people in all parts of the world, especially in the U.S., who actually would like patent trolls to be sent to jail (whether or not they say so explicitly). And while I personally feel that InterDigital should simply be fined (but at a substantial level that really hurts) for its extortionate practices, it's the case not only in China but also pretty much everywhere else that antitrust offenders can go to jail -- the question is just how bad their conduct must be, and in terms of how this harms competition and innovation, InterDigital's attempt to leverage its U.S. patents (should those ever give it much leverage) in order to impose excessive royalties in China or Europe is very bad.

Yesterday's ITC decision wasn't too surprising. In October I already highlighted the fact that the ITC didn't want to receive any public interest submissions on FRAND issues and concluded from it that the ITC, at that stage, didn't see a need to discuss FRAND here because of InterDigital's inability to prevail on liability. If InterDigital had won a liability finding in its favor, the ITC would have had to request a new round of submissions in light of the aforementioned Presidential veto in the Samsung case.

InterDigital can and will keep on suing (for example, it brought another ITC complaint against Nokia, Huawei, ZTE and Samsung earlier this year). The only other option it has is to lower its demands to levels reflective of the apparent weakness of its portfolio. Nokia's wireless devices will soon belong to Microsoft, which has already shown in its dispute with Google's Motorola Mobility that it doesn't bow to SEP-based extortion. Huawei and ZTE are pretty tough in this regard as well, and while InterDigital fails to win anything in the U.S., its Chinese antitrust problem may get worse. LG is a pretty aggressive SEP monetizer, but it has much stronger patents than InterDigital and won't overpay either. InterDigital is asserting some of the same patents that have just failed against Samsung in that newer ITC case I just mentioned. Samsung won't be frightened.

If you'd like to be updated on the smartphone patent disputes and other intellectual property matters I cover, please subscribe to my RSS feed (in the right-hand column) and/or follow me on Twitter @FOSSpatents and Google+.

Share with other professionals via LinkedIn:

Latest move in Google's erratic patent strategy: upgraded Open Invention Network membership

On Wednesday the Open Invention Network (OIN) and Google announced that Google's OIN membership was upgraded from Associate Member to Full Member. The OIN was founded eight years ago by companies including IBM and Red Hat with the stated goal of protecting Linux from patent assertions and after all these years still hasn't delivered a verifiable proof of concept. There are two ways in which it could have delivered such proof:

  • It could have announced a license deal with a company that previously asserted and then, as a result of the conclusion of that agreement, abandoned patent assertions and royalty demands involving Linux.

  • It could have given patents to a target of Linux-related patent assertions for the purpose of countersuing a plaintiff, who would then (if OIN's patents were strong) agreed to drop its infringement claims.

Neither of the above has happened to date, and I doubt it ever will. The closest thing to a success story that I heard from people defending the OIN approach is that the organization gave four patents to Salesforce in 2010, three of which were asserted against Microsoft. But the announcement of the Microsoft-Salesforce settlement made clear that Salesforce accepted to pay. OIN's supporters claim that Salesforce got a better deal thanks to OIN's support, but this is not a verifiable success story and I doubt it: until that point, a few other Microsoft patent disputes in which OIN was not involved at all were settled similarly quickly. (Nowadays defendants are more inclined to defend themselves for years on end, but not back then.)

Microsoft has struck many hundreds of patent license deals since the OIN was founded, and many of them relate to Linux (with or without Android on top of it) and involve large and sophisticated licensees. There's no sign of the OIN having complicated Microsoft's award-winning patent licensing efforts.

Google's decision to step up its commitment to OIN comes as no surprise. Last year the OIN added Android technologies such as the Dalvik virtual machine to its list of covered technologies. And Google likes to make patent-related announcements that actually don't change anything, typically in an open source context.

Google's real strength is to defend itself against infringement allegations and to strike down patents through invalidity challenges, though this doesn't always work (Apple has already defended a couple of key patents against attacks in which Google likely had a hand).

Any attempts by Google to bring or threaten with offensive counterclaims against others have been pathetically unsuccessful so far. It currently has zero enforceable patent injunctions in place over Motorola Mobility's patents worldwide.

Google is also playing the political card and pushing for patent reform, but at this juncture it appears that U.S. Congress won't change patent law in any way that would enable Google to get away with Android's infringement. There will be some limited and targeted changes, and those may very well happen in 2014 -- but no game-changer for disputes between large players. Google has not made any headway in terms of making U.S. lawmakers believe that the patent system is not a major innovation engine.

It's really impossible to see any tangible benefit Google is going to get out of its upgraded OIN membership with respect to the problems it currently faces. The OIN "protects" Dalvik, but Oracle left the OIN a while ago and is currently not pursuing patent but copyright claims against Android (and it's now on the winning track based on the positions taken by three Federal Circuit judges at an appellate hearing earlier this month). Microsoft already has pretty much all major Android device makers signed up as paying licensees. Apple's patent infringement claims are mostly in areas the OIN doesn't even cover -- and if the OIN had wanted to stop Apple from suing Android device makers, it would have had almost four years now (counting from Apple's first lawsuit against HTC in March 2010) to do so. And there's Nokia (in other news today, Nokia is suing HTC over Google Maps and Google Navigation). The OIN can't change anything about Nokia's patent monetization and litigation.

If you'd like to be updated on the smartphone patent disputes and other intellectual property matters I cover, please subscribe to my RSS feed (in the right-hand column) and/or follow me on Twitter @FOSSpatents and Google+.

Share with other professionals via LinkedIn:

Tuesday, December 17, 2013

Senators are sympathetic to targets of dubious patent assertions but want focused reform

Today the Judiciary Committee of the United States Senate held a hearing on the Leahy-Lee patent reform proposal, "Protecting Small Businesses and Promoting Innovation by Limiting Patent Troll Abuse". After the recent fast-track passage of the Goodlatte bill by the House of Representatives, the key question at this juncture is what position the Senate will take on reform. The National Journal even wondered whether the current push for patent reform could survive the winter.

The purpose of this blog post is just to share my overall impressions of the debate. I will go into more detail on the substance of the Senate and House bills in the early part of next year.

Based on today's hearing, I believe patent reform will remain high on the agenda after this winter, and while there are calls by some politicians, such as Sen. Dianne Feinstein (D-CA), to take more time and hold more hearings, I think the push for reform has enough momentum that something will probably happen in 2014 -- but it won't be broad. There won't be a law unless the Senate and the House reach a consensus, a fact that Sen. Sheldon Whitehouse (D-RI) strongly urged reform advocates to consider. Sen. Whitehouse advised the reform movement to be flexible and not to "vindicate [its] ire at the deplorable conduct of these patent trolls at the expense of getting a bill through the Senate".

Wise words, and I think patent reform advocates have already learned their lesson in the House. In particular, they know that an expansion of the Covered Business Methods (CBM) program is a surefire way to delay and probably derail the process. Sen. Charles ("Chuck") Schumer (D-NY) delivered by far and away the most emotional speech at today's hearing. The witnesses (two panels) were all rather low-key, and so were almost all of the senators, except for Sen. Schumer, who still hopes to garner support for his proposal to expand the CBM program. He argued that patent litigation is a highway with two exits, both of which exact a high toll: settle or pay lawyers to defend yourself. He views an expansion of the CBM program as a "cost-effective off-ramp from the patent litigation highway", though this is debatable because it would still be quite costly to challenge a patent even on that basis. Sen. Schumer openly conceded that he's very emotional about this and called it a "shame that those who believe in valid patents so strongly defend the invalid patents", which he said he finds "appalling". But he recognizes his proposal is controversial. He looks ready to keep pushing for it after the winter. At this stage I think this effort is futile. It will be hard enough to build a consensus even without such a major league dealbreaker.

Just like in the House, there's awareness in the Senate for the importance of the patent system to the innovation economy. Politicians have received numerous letters from victims of dubious patent assertions, and there's definitely a lot of sympathy there and a will to act. Still, a broad majority doesn't want to enact any overreaching measures. Sen. Leahy's introductory remarks are online and reflect that spirit very well. And the co-sponsor of his bill, Sen. Mike Lee (R-UT), was also very clear about the need to proceed with caution.

There was some criticism of fee-shifting (by senators and witnesses), but it still looks like something that will happen. Even the chief IP counsel of Adobe, Dana Rao, who is definitely against overbroad reforms, argued very passionately for fee-shifting, though some politicians (such as Sen. Dick Durbin (D-IL) are profoundly concerned that fee-shifting compromises access to justice for small inventors (this concern is obviously very hard to understand for someone who lives in a jurisdiction in which it's the norm).

Just like patent reform advocates have an opportunity now to make progress with fee-shifting and transparency and possibly in the demand letter context, those who defend the status quo should also think hard about what realistically achievable outcome would constitute a "sweet spot" from their perspective. After today's hearing it's clear that there is an exceptionally high level of awareness among politicians for the problems created by patent trolls. From a short-term perspective some may want to dilute any reform proposals beyond recognition. A complex political process in which two chambers of Congress have to reach an agreement offers various opportunities for dilution. But the desirable outcome for defendants of the status quo would actually be a reform bill that has an easily verifiable effect on the activities of patent trolls and the related statistics. Fee-shifting should make the patent trolling business costlier and riskier. That would be meaningful progress, and it would greatly reduce the likelihood of another series of patent reform hearings after whatever comes out of the current process.

After the passage of the Leahy-Smith America Invents Act, hardly anyone would have thought that patent reform would be on the political agenda again so soon. Sen. Patrick Leahy (D-VT) himself is now in favor of another bill, recognizing that the previous one didn't go far enough. He sees that small businesses in his state continue to suffer from patent assertions. While still a supporter of the patent system, Sen. Leahy now proposes targeted measures in order to combat the patent troll problem. And that appears to be the position of a broad majority of U.S. legislators.

If you'd like to be updated on the smartphone patent disputes and other intellectual property matters I cover, please subscribe to my RSS feed (in the right-hand column) and/or follow me on Twitter @FOSSpatents and Google+.

Share with other professionals via LinkedIn:

Samsung wants a retrial of the November retrial in its first U.S. patent litigation with Apple

Last month a federal jury in the Northern District of California awarded Apple $290 million in damages for Samsung's infringement of 13 of the 28 products accused in this first litigation between these parties, replacing a vacated $410 million portion of the August 2012 §1.05 billion verdict. When Samsung asked for a retrial, it obviously hoped to get more out of it than roughly a 10% discount, but the total of the affirmed damages from the first trial and the retrial award is still almost $930 million.

The retrial was a necessity for formal reasons after the court disagreed with the notice dates Apple presented to the 2012 jury. In my detailed Q&A, published a few days before the retrial commenced, I said that neither of the parties nor the court really wanted a retrial under these circumstances. And at the time I already discussed the theoretical possibility of one or more further retrials. As expected, Samsung is still unhappy and formally requests either a judgment as a matter of law (JMOL) in its favor or a new trial or a massive adjustment of the damages award (this post continues below the document):

13-12-14 Samsung's Corrected Motion for Judgment as a Matter of Law by Florian Mueller

Asking for an adjustment on a JMOL basis is common practice. Apple is doing the same in its motion (asking the court to hold that Apple's $379 million retrial damages claim was the only result a jury could have reasonably arrived at), but it's not asking for yet another trial (this post continues below the document):

13-12-13 Apple's Motion for Judgment as a Matter of Law by Florian Mueller

Apple's motion is considerably shorter than Samsung's not only because Apple focuses on JMOL but also because Apple conservatively applies the page limit for post-trial briefs to the total of this JMOL motion and the renewed motion for a permanent injunction that it will bring once the United States Court of Appeals for the Federal Circuit remands the injunction question to Judge Lucy Koh's court in California. Last month Apple prevailed with respect to its software patents-in-suit, but the Federal Circuit has not yet issued its mandate. Apple says this could happen as early as December 26, but I think it will take a couple more months due to an expected Samsung petition for a rehearing and it's not unimaginable that Samsung might even try to appeal this issue to the Supreme Court.

Samsung is extremely unlikely to persuade Judge Koh to order a retrial of the retrial and presumably brought this motion only to preserve its record for the appeal. Judge Koh really wants to reach the point of a final judgment so as to enable the parties to appeal the unfavorable parts (obviously, Samsung has more of a need to appeal than Apple, but Apple also can seek some improvements) to the Federal Circuit. If the Federal Circuit finds any jury instruction prejudicial or reverses any underlying liability finding, or disagrees with other relevant parts of the district court judgment, then there will be a third trial in this case (absent a settlement). Given that there are so many legal questions in this case and a multiplicity of issues either party can raise on appeal, a third trial is not entirely unrealistic. But for practical reasons it doesn't make sense to delay the inevitable cross-appeal, given that even a retrial at this stage would still involve the risk of a need for a retrial on remand.

Samsung's arguments for a retrial of the retrial have two truly interesting aspects and one that is idiotic. The stupid point Samsung makes can be addressed quickly. It claims, as it did at trial, that Apple's lead counsel, Morrison & Foerster's Harold McElhinny, appealed to "racial bias" against Asians. But he didn't use any pejorative terms of the kind you can hear at the beginning of Full Metal Jacket or say anything other that really has to do with race. At most one can say that he appealed to patriotism, but even that would be at least an exaggeration given that he just explained how domestic companies go out of business if they can't defend their intellectual property against foreign copyists. I just don't understand why Samsung made the decision to press this non-point instead of focusing on its more reasonable arguments.

Samsung's lawyers did it again and figured out how the jury arrived at its numbers. Last year they reverse-engineered almost the entire original jury verdict. This time around they can explain the jury's methodology for each of the products at issue in the retrial:

  • Six devices were found to infringe only software (not design) patents. On those, the jury awarded precisely what Apple claimed in lost profits and reasonable royalties (this was obviously easy to figure).

  • The other serven devices were found to infringe both software and design patents. On those, the jury awarded the same 100% of Apple's claimed lost profits and reasonably royalties plus the exact average of the parties' calculations of total infringer's profits (61.4% of Apple's expert's number because even Samsung didn't argue that there were no profits).

Samsung argues that the jury failed to do its job of actually deducting costs from the claimed profits and that such "compromise" verdicts are contrary to law (provided that the jury's methodology can be reverse-engineered). If there's any way Judge Koh can uphold the jury award nevertheless, I guess she will, just to make sure that the case gets appealed now rather than later.

The other interesting argument for a retrial of the retrial is Samsung's allegation that Apple violated the Entire Market Value Rule and generally misled the jury by comparing its damages claim (as well as the minuscule amount Samsung conceded it owed Apple) to Samsung's total revenues generated with the accused products in the U.S. during the relevant period of time ($3.5 billion) as well as the total number of accused devices sold (10.8 million units) despite the fact that, for example, not all of those products infringe design patents (which entitle a patentee to a disgorgement of infringer's profits). Samsung points to the January 2011 Federal Circuit decision in Uniloc v. Microsoft, which involved the grant of a new trial because of the patentee's use of an inadequate damages theory. I guess what Apple did in the Samsung retrial was not tantamount to using an inadequate theory (given that the numbers presented by its experts were based on court-approved theories), but this kind of argument yet makes more sense than the racial bias story.

If you'd like to be updated on the smartphone patent disputes and other intellectual property matters I cover, please subscribe to my RSS feed (in the right-hand column) and/or follow me on Twitter @FOSSpatents and Google+.

Share with other professionals via LinkedIn: