Saturday, January 26, 2013

Apple, Google disagree on which U.S. appeals court should rule on their FRAND contract case

A new round of legal maneuvering between Apple and Google's Motorola Mobility could, as one potential outcome, have the parties meet before Judge Richard Posner again. Last year Judge Posner dismissed both parties' claims against each other in the Northern District of Illinois, where he was sitting by designation though he is a circuit judge who usually hears appeals. Next time he may see Apple and Google (Motorola Mobility) in his primary capacity.

The latest procedural dispute between Apple and Google (Motorola) is over which U.S. appeals court -- the Federal Circuit or the Seventh Circuit -- should hear the parties' cross-appeal of a FRAND contract ruling handed down in November 2012 by the United States District Court for the Western District of Wisconsin. The Federal Circuit, to which Apple appealed certain parts of the ruling earlier this month, is the circuit for all cases arising under U.S. patent law, while contract cases brought in the Western District of Wisconsin would usually be appealed to the Seventh Circuit. Judge Posner is a Seventh Circuit judge, and used to be this appeals court's Chief Judge.

Late on Friday (January 25, 2013), Google filed with the Federal Circuit a "motion to dismiss for lack of jurisdiction", which includes a request that the Apple-Google cross-appeal be transferred to the Seventh Circuit. Google already announced its intent to bring such a motion when it gave notice (in Wisconsin) of its appeal of the parts of Judge Barbara Crabb's FRAND ruling that are unfavorable to it, particularly certain contract-related summary judgment decisions in Apple's favor and the fact that Apple's claims were dismissed only without prejudice (contrary to Judge Crabb's original intention). Yesterday the Federal Circuit consolidated the two appeals into a single cross-appeal, and a few hours later Google's Motorola brought this motion.

Venue fights occur all the time, though they are much more common in district court (East Texas or Northern California? Delaware or Massachusetts?) than on appeal, where in most cases there is clarity as to the competent circuit. In a run-of-the-mill patent infringement case there would be no debate over the Federal Circuit's competency (regardless of geography), and in most contract cases the appeals court would simply be the one to whose circuit the district court belongs. There was no debate over the competency of the Ninth Circuit in the FRAND contract dispute between Microsoft and Motorola after the latter appealed an anti-enforcement injunction won by Microsoft (which the Ninth Circuit upheld). But there's an important difference between the Microsoft and Apple FRAND cases: Microsoft brought its FRAND contract action in November 2010 pre-emptively (before Motorola's assertions), while Apple raised FRAND contract and (unlike Microsoft) antitrust issues in the form of counterclaims to Motorola's earlier-filed ITC complaint. Counterclaims brought in an ITC investigation must be immediately severed and transferred to a district court, and Apple elected the Western District of Wisconsin.

Google's motion cites the relevant paragraph that establishes the Federal Circuit's US-wide jurisdiction over patent cases, 28 U.S.C. 1295(a)(1):

"The United States Court of Appeals for the Federal Circuit shall have exclusive jurisdiction—(1) of an appeal from a final decision of a district court of the United States…in any civil action arising under, or in any civil action in which a party has asserted a compulsory counterclaim arising under, any Act of Congress relating to patents or [...]" (emphasis mine)

Google argues that Apple's Wisconsin case was based on contract and antitrust law, not patent law. Oddly, the word "counterclaim", which I highlighted in the above quote, appears only this once in Google's motion. But the Wisconsin case constitutes the removal of counterclaims from an ITC investigation, and no one would ever doubt that an ITC decision must be appealed to the Federal Circuit. It's also my understanding that at least some (if not all) of Apple's claims are compulsory counterclaims to Motorola's infringement claims involving standard-essential patents. But I'm more of a business and tech guy and just watching what Apple and Google's experts on civil procedures are saying. Still I am of the opinion that Google's argument for a transfer misses the point unless and until Google explains why the Federal Circuit should not have jurisdiction over (compulsory) counterclaims to an ITC complaint.

As always, the question is what the moving party hopes to gain. There are three possible motives here:

  • Google might hope that a Seventh Circuit decision would likely be more favorable than a Federal Circuit decision.

  • Additionally or alternatively, Google might prefer the Seventh Circuit because if it loses there, the impact of its defeat will be more limited. A Federal Circuit decision would affect all patent infringement cases U.S.-wide in which such claims might be brought as counterclaims, and all ITC investigations. A Seventh Circuit decision would become the law within that circuit and would have significant persuasive value outside it, but it wouldn't have the U.S.-wide direct impact of a Federal Circuit opinion.

  • Another potential consideration is that the Federal Circuit is already hearing the parties' cross-appeal of Judge Posner's ruling. It's possible that the Federal Circuit would consolidate both Apple-Motorola FRAND cases. For whatever reason Google might not want that to happen.

As for the first item, I don't see an obvious reason for which the Seventh Circuit would be more likely to rule in Google's favor than the generally patentee-friendly Federal Circuit. It's Motorola's home circuit, but I doubt that such high-level judges are influenced by that fact in any way (and now it's just a subsidiary of a Silicon Valley company). Judge Crabb is likely a well-respected judge within that circuit, but if she erred, they'll overrule here.

The most interesting question here is whether Judge Posner would become involved with this appeal. He obviously can't hear an appeal of his own district court decision, but that one has been appealed to the Federal Circuit anyway. Technically, the Wisconsin case is a separate case, though there is an overlap with respect to the FRAND issues. At some point, the case that Judge Posner adjudicated in the Northern District of Illinois was also pending in Wisconsin -- until Judge Crabb gladly passed it on to Judge Posner, who had volunteered to handle it.

Assuming for the sake of the argument that Google's motion succeeds and that Judge Posner forms part of the panel ultimately hearing this case, what would this mean for the likely outcome? It's hard to tell. On the one hand, Judge Posner is definitely as FRAND-friendly as it gets, and Google has been quite negative on the FRAND part of his ruling. On the other hand, he's also a judge who wants private parties to respect the courts and the judicial process, and if Apple had taken its famous "$1 max." position in front of him, I don't think he would have accepted it.

Google's motion mentions that Apple will oppose it, and I'm quite sure Apple's argument will stress the fact that the Wisconsin case is just the result of a mandatory removal of counterclaims from the ITC. The resolution of key FRAND issues by U.S. appeals courts is a very important matter. The industry needs legal certainty, and it needs more of it than the FTC appears to be willing to provide through its settlement with Google.

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