Thursday, February 28, 2013

Nokia asks ITC to reverse 'wholly groundless' dismissal of a patent asserted against HTC

Earlier this month Administrative Law Judge Thomas Pender ordered a partial termination of the ITC investigation of Nokia's complaint against HTC, dismissing one of the nine patents-in-suit. The judge did not consider "wholly groundless" HTC's assertion that the patent in question, U.S. Patent No. 7,366,529 on a "communication network terminal supporting a plurality of applications" (basically, a patent on a way to route data to apps), fell within the scope of an arbitration clause of a standard-essential patent (SEP) license agreement between Nokia and HTC.

In mid-February Nokia filed a petition for review, asking the Commission, the six-member decision-making body at the top of the U.S. trade agency, to overrule Judge Pender on this matter. Today a public redacted version of Nokia's motion finally entered the public record, enabling me to report on why Nokia believes Judge Pender's decision was mistaken.

Nokia does not dispute that the legal standard HTC had to meet was that of a claim that is not "wholly groundless". That is, of course, a very low hurdle. But even a very low hurdle is a hurdle, and there must be scope for dismissing implausible and unsubstantiated theories. Nokia complains that Judge Pender applied the "wholly groundless" standard in a way that would render it meaningless, and that his ruling failed to offer any analysis of some basic aspects of HTC's argument for dismissal (Judge Pender had suggested that Nokia sought a "detailed evaluation of the facts" underlying HTC's motion, which Nokia says isn't needed, but at least some analysis of the merits of the motion must be performed in Nokia's opinion, even under the "wholly groundless" standard).

Nokia says that the arbitration HTC wants this patent referred to "cannot provide it with any defense in the investigation". Nokia's petition is heavily-redacted, allowing the general public to view only a skeleton of its argument, but at any rate, this is what Nokia is basically saying:

  • HTC's argument concerning the '529 patent is related to a feature that Nokia says it does not even accuse of infringement in this investigation. The description of that feature is redacted. Whatever it is, Nokia says that the most HTC could get out of arbitration (even if all of its factual representations were true) is a license to practice a feature that is not at issue in the investigation. Therefore, arbitration would not be dispositive of any part of the investigation: it would merely cause a delay.

  • According to Nokia, HTC does not even specify any particular industry standard to which it claims the '529 patent is essential, nor has Nokia based its infringement allegations on any industry standard. But it appears that the license agreement is clear (even though quotes from it are redacted) that only SEPs fall within its scope.

Most of the documents related to this motion have not been published yet. What I concluded from Judge Pender's order is that the question of arbitrability (i.e., whether an issue is subject to the arbitration clause in the existing SEP license agreement) should be resolved by an arbitrator as opposed to the ITC. Judge Pender apparently liked this idea. Nokia now hopes that the Commission is not going to "encourage parties to manufacture disputes where non exist, in an attempt to escape the Commisssion's reach" (and to cause delay).

At this stage of an investigation it rarely happens that the Commission overrules a judge, but this here could be a case in which the Commission identifies a now-or-never situation: if it doesn't use its authority to maintain a reasonable "wholly groundless" standard, it will give up its jurisdiction over numerous cases or parts of case with respect to which parties can raise frivolous arbitration defenses. For lack of access to some critical information I don't want to offer a prediction here, but so far there's really no indication of HTC having a credible arbitration defense. If I find any such indication in other documents that may show up on the ITC's document system in the future, or hear anything at any German Nokia v. HTC trial, I will definitely report on it.

By the way, the Mannheim Regional Court postponed its decision on Nokia's patent infringement lawsuit against HTC's distribution of the Google Play store app (in which Google is acting as a third-party intervenor) by one week. It was originally scheduled for tomorrow (March 1, 2013). The decision, which may or may not be a final ruling, is now going to come down on March 8, 2013.

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Japanese ruling in Apple's favor is Samsung's 22nd failed assertion of a standard-essential patent

Various news agencies including AFP report on a statement that Samsung sent to the media, according to which statement the company lost a cellular standard-essential patent (SEP) lawsuit against Apple in Japan. [Update] I have received information from a reliable source that the outcome-determinative issues were all related to FRAND licensing and standard-setting misconduct. I'm trying to find out in more detail what the Tokyo-based court said in its decision. [/Update]

The patent-in-suit corresponds to U.S. Patent No. 7,447,516 on a "method and apparatus for data transmission in a mobile telecommunication system supporting enhanced uplink service", which a California jury did not find infringed last summer. This is a 3G declared-essential patent.

Of the 25 SEP assertions by Samsung against Apple that have either been dropped or come to judgment by now, only three have been successful: two in Samsung's own country (South Korea) and a third one in the Netherlands, where injunctive relief (which Samsung was also pursuing in Japan, while it has meanwhile withdrawn its European SEP-based injunction requests) had been ruled out beforehand and Samsung will receive only a minor amount of damages. Today's loss in Japan is the 22nd SEP assertion that went nowhere. In all fairness, this number includes one stayed case in Germany: after the nullity (invalidation) proceedings that are still ongoing in a parallel case, the infringement case could be resumed, but the patent was considered unlikely to survive in its current form and may no longer be standard-essential in an amended version.

In a recent filing with U.S. antitrust authority the Federal Trade Commission, Apple highlighted Samsung and Google's dismal track record with assertions of declared-essential patents against the iPhone maker:

"Apple's experience has shown that declared-essential patent holders often fail to satisfy their burdens of proof on these issues in litigation. For example, MMI has asserted ten declared-essential patents against Apple in the United States and Germany. Nine of those patents have been found invalid or not infringed (or both). Similarly, Samsung has asserted over 20 allegedly essential patents against Apple. To date, Samsung has lost thirteen decisions (either because of non-infringement or invalidity or both) and won only three. In addition, Samsung has dropped eight other declared-essential patents, tacitly recognizing the defects in those patents."

That was before today's ruling. The number of lost decisions has now gone up to 14. If the eight withdrawn patents are added, that's 22 unsuccessful SEP assertions -- 21 on grounds of non-infringement and/or invalidity, and one for FRAND reasons.

It really wouldn't make sense for FRAND rates (whether determined by arbitrators or federal courts) to be set based on a totally unjustified presumption of essentiality. In connection with cellular standards and many other standards relevant to the ongoing smartphone patent disputes no independent authority actually verifies whether a declared-essential patent is actually essential. Litigation is always the moment of truth for a patent, and it turns out to be the truth that there's a whole lot of overdeclaration going on. Apple proposes a pragmatic solution to this problem: rather than presume that all declared-essential patents are indeed valid and essential or analyze an entire portfolio, an arbitrator or court should evaluate a "representative set" of declared-essential patents.

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UK judge who issued extreme ruling for Samsung against Apple hired by... Samsung!

By far and away the weirdest ruling in the worldwide smartphone and tablet wars came down last year in the UK, where a publicity order forcing Apple to promote Samsung's products and to make itself ridiculous in public was upheld by an appeals court, and where Apple's efforts to comply with the order were deemed "false and misleading". I thought Apple was being treated way too harshly because in the end it was just trying to defend its intellectual property rights in court and merely had refused to withdraw a German lawsuit after a UK ruling by a lower court.

The judge who gave the first opinion for the appeals court (as you can see at the start of the published decision) was The Rt. Hon. Professor Sir Robin Jacob. As Wikipedia explains, he "retired from the Court of Appeal in March 2011" to become a professor, but under Section 9 of the Senior Courts Act 1981, ex-judges can still be invited to sit on the bench. On that basis, Sir Robin Jacob handled the Samsung v. Apple case that made headline news around the world because it appeared that Apple filed frivolous lawsuits (which is not true). In a ruling on Apple's first attempt to comply with the publicity order, Sir Robin Jacob even noted a "lack of integrity".

For someone so concerned with "integrity" it is utterly unusual to issue a high-profile and extreme ruling in favor of a particular party (Samsung in this case) only to be hired as an expert by that same party in another dispute. But that's what has happened here, and I wonder how certain people in Cupertino feel about it. Yesterday Samsung's counsel in the ITC investigation of Ericsson's complaint submitted the protective order subscriptions (covenants to comply with the ITC's strict confidentiality rules) of nine "experts [...] working on behalf of Respondents Samsung Electronics Co. Ltd., Samsung Electronics America, Inc., and Samsung Telecommunications America LLC". Lo and behold, Sir Robin Jacob is one of them. Here's the main part of the letter (click on the image to enlarge or read the text below the image; I underlined his name):

"Enclosed for filing please find Protective Order Subscriptions for experts Coleman Bazelon, Ph. D, Philip Green, Thomas D. Vander Veen, Ph. D, Iain Sharp, Michael Allan Martin Davies, Denis Mazeaud, Albert A. Petrick, Keith R. Ugone, Ph.D, and Sir Robin Jacob working on behalf of Respondents Samsung Electronics Co. Ltd., Samsung Electronics America, Inc., and Samsung Telecommunications America LLC in the above-referenced investigation."

I'm sure that Samsung and Sir Robin Jacob wouldn't be doing this if there was any risk of this conduct violating the law. Apparently an ex-judge who is invited to rule on a case involving a given party is not barred by existing UK rules (though this case here may spark a debate over whether some reform is needed) from being hired by the same party in another litigation outside the UK less than four months later.

I also have no doubt that at the time of the ruling Sir Robin Jacob was not being paid, or improperly promised to be paid, by Samsung, and he won't have had any contact with Samsung or Samsung's counsel that would have been against the rules and barred him from adjudicating the Samsung v. Apple case.

Furtermore, Sir Robin Jacob is truly an expert in patent law and there is no question that Samsung will benefit from his knowledge.

That said, this just doesn't feel right. It gives the impression that a judge who deals Samsung's number one rival a huge PR blow, in a way that I found very extreme and unjustified, will be generously rewarded. For that reason alone, I think both Samsung and Sir Robin Jacob should not have done this. What would people say if Judge Lucy Koh, a few months after denying Apple a permanent injunction against Samsung, returned to private practice and was hired as an "expert" by Samsung in a German litigation with Ericsson? I guess there are written or at least unwritten rules in the United States that would prevent this from happening in the first place. In the UK it appears to be above board and accepted.

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Tuesday, February 26, 2013

Sun 'never would have invested as heavily in Java' without copyright protection, its founder writes

Last week a diverse group of industry leaders, creatives, academics and a former U.S. copyright chief submitted amicus curiae briefs in support of a reversal of the district court's ruling on the Android-Java copyright infringement case. Google subsequently requested additional time to respond to Oracle's opening brief and these submissions.

In my previous post on this case I summarized and quoted from the amicus curiae briefs of former Register of Copyrights of the United States Ralph Oman and three computer science and engineering professors. I would now like to highlight the last amicus brief in support of reversal to have become publicly available. A formality had caused a delay. Here's the amicus curiae brief of Sun founder Scott McNealy and former Sun Executive Vice President Brian Sutphin (this post continues below the document):

Scott McNealy-Brian Sutphin Amicus Curiae Brief in Oracle v. Google by

This submission is unique in that it focuses on the philosophy and history of Java, addressing the legal issues in this case only indirectly. For example, the explanation of the "Write Once, Run Anywhere" principle has a bearing on why Google's "fair use" defense should be rejected as a matter of law, and many technical explanations and examples will help the United States Court of Appeals for the Federal Circuit to appreciate the creative choice involved in the authoring of the material Google copied.

The strength of this brief is its coherence, which one can only appreciate by reading the actual document. No blog post would be able to convey it appropriately. But there are two things that I would like to highlight because they are particularly relevant.

The first one is an innovation policy argument: Judge Alsup's denial of copyright protection to a huge amount of highly creative and indisputably original source code was not anticipated by Java's creators, and if they had thought that this was the law, they would have invested much less in the platform:

"In denying copyright protection to the copied elements of Java, the district court has upset the expectations of those that created the Java platform, who thought that the source code that they painstakingly developed would receive the same copyright protections afforded to any other source code (or literary work). [...] Had Sun known a priori that the result of investment of millions of dollars and years of development time would not receive copyright protection, it never would have invested as heavily in Java."

And the final sentence of this brief reinforces this point:

"The threat that a competitor like Google could simply take the naming conventions and organization of the Java Packages would have deterred Sun from maintaining its decades-long mission to revolutionize computer software development."

This is perfectly credible. Sun was a company, not a charity.

We're going to touch on innovation policy again at the end of this post. The second aspect of the McNealy-Sutphin brief that I wanted to discuss here is similar but complementary to the part of the Spafford-Ding-Hollaar brief that explains creative choices in API design based on the example of a drawCircle method. An API can provide a function for drawing a circle that is dedicated to this task, or a more flexible drawEllipse method (a circle is an ellipse with two identical axes), or an even more flexible drawPolygon method with a group of parameters including one for the number of sides ("0" would then correspond to a circle). What Scott McNealy and Brian Sutphin do in their brief (among other things) is to show how Sun, Microsoft and Apple each developed unique APIs, and the example they use for this is related to time zones and date formats:

"In Java, a developer setting the time zone in an application would first go into the 'DateFormat' class of the java.text package and declare the 'setTimeZone' method. By just looking at their labels a developer will intuitively know that the DateFormat class can be used to format a date, and then use the setTimeZone method to set the actual time zone for that developer's application. But creators of competing computer programming environments can accomplish this same function in an unlimited number of different creative ways.

Indeed, a quick examination of other programming environments shows that creators of other development platforms provide the same functions with wholly different creative choices. For example, Apple's iOS platform devotes an entire class to set the time zone in an application-- the 'NSTimeZone' class. Unlike Java's placement of that package in the java.text package, Apple put it in its 'Foundation' framework. (A framework is Apple's terminology for a structure conceptually similar to Java's 'package.'). Apple's NSTimeZone class contains numerous methods to manipulate time zones, including, retrieving time zones with abbreviations ('timeZoneWithAbbreviation'), retrieving time zones with names ('timeZoneWithName'), and setting the default time zone ('setDefaultTimeZone'). It was Apple's creative decision to organize the time zone programs in this manner, select time zone programs that it believed was desirable to programmers and label the time zone programs as they chose.

Likewise, Microsoft provides similar functionality, but with an entirely different structure, naming scheme, and selection. In its Windows Phone development platform, Microsoft stores its time zone programs in the 'TimeZoneInfo' class in its 'System' namespace (Microsoft's version of a 'package' or 'framework'). Within that organizational structure, Microsoft has programs to, among other things, convert time from different time zones ('ConvertTime') or determine whether a particular date and time in a particular time zone is ambiguous ('IsAmbiguousTime')."

The above three paragraphs are very powerful. They show that something is fundamentally problematic about the district court's holding that copyrightability had to be denied partly because the relevant code comes down to a method of operation and partly for "interoperability" reasons. Where there is so much creative choice that three major industry players choose three distinct designs, there must be copyright protection. Patents are not the answer in this context because it doesn't matter which of these APIs came first: irrespectively of novelty, these efforts to make a platform "elegant and easy to learn and memorize" deserve intellectual property protection. This is about how the code is written, not about the functions it performs.

Messrs. McNealy and Sutphin then contrast the original and creative approach of Sun, Apple and Microsoft with Google's copying:

"Apple and Microsoft made different creative choices from those found in Java. This difference in creative choices exists amongst Sun/Oracle, Apple, Microsoft, and countless other developers of programming environments--with only one notable exception: Google's undisputed and intentional copying of Java's creative choices at issue in this case. While Sun/Oracle, Apple, and Microsoft invested considerable resources and valuable time making creative decisions for their respective programming libraries, Google did not: it merely copied desirable packages from the Java platform."

And the net effect was the opposite of interoperability:

"By copying the creative elements of the Java platform familiar to Java developers, but at the same time ensuring that Java code written for Android was transformed into Android-specific code, Google's actions had two consequences: quick access to Java developers while ensuring that Java cross-platform compatibility was not maintained. Google's copying of the creative structure of Java was certainly successful in attracting developers quickly, but undermined the very principle that Java sought to promote: cross-platform compatibility."

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For disparate reasons, Apple and Qualcomm raise concerns about arbitration of FRAND terms

This is my third post in a row on the two dozen submissions the competition enforcers at the Federal Trade Commission received in connection with the proposed Google and Motorola Mobility decision and consent order. I previously reported on Apple and Microsoft's criticism of Google's conduct and Qualcomm's thinly-veiled threat to duke it out in court with the FTC should its own pursuit of injuntions based on standard-essential patents (SEPs) come under antitrust scrutiny. What I don't want to spend time on is a bunch of filings that just reiterate the usual pro-injunction talking points previously filed with the ITC (for example, BlackBerry's submission consist almost entirely of copies of two letters to the ITC). I'm primarily interested in submissions that make new arguments or raise new issues.

Under the envisioned FTC-Google consent decree one of the things an implementer of a FRAND standard can do to fend off injunction requests is to trigger binding arbitration of the royalty rate and other relevant terms of a SEP license agreement. Even though the FTC held Google (Motorola Mobility) to have acted anticompetitively, the proposed consent decree imposes requirements on the conduct of innocent implementers unless they opt out of the potential benefits of the antitrust deal. They must do something, and initiating arbitration is one option, the other being a FRAND determination action in federal court.

Many people associate with the word "arbitration" something far more peaceful and helpful than it actually is. Arbitration isn't superior over litigation in all respects -- it has its specific advantages and drawbacks. Even if parties "agree" to arbitrate, it's merely a procedural agreement, irrespectively of which they could still be light years apart on the substance of a dispute. A few months ago, Apple and Google discussed the possibility of having their FRAND dispute resolved through arbitration, and this led some commentators to believe that a settlement was near. There are probably many thousands of lawsuits pending right now in federal and state courts in which no one is even contemplating arbitration, yet many of the parties to those disputes are considerably closer to a settlement than Apple and Google were last year when they explored this possibility. If judges (or regulators) encourage arbitration, they often do so simply because it disposes of cases they otherwise have to rule on. This doesn't make arbitration a panacea.

It's interesting to see that Apple and Qualcomm, while standing on opposite sides of the FRAND debate, are both somewhat uncomfortable and fear that arbitration could result in non-FRAND terms. They both own SEPs and need SEP licenses from others, but Apple is clearly focused on building products that add tremendous value on top of industry standards while Qualcomm derives a large part of its revenue from SEP licensing and depends on SEPs in its product business. Therefore, Apple is more concerned about arbitration resulting in royalties and other terms that are too onerous on licensees, while Qualcomm is worried about ways in which willing licensees might game the system and benefit exceedingly from the arbitration option the FTC envisions. It's no secret that I'm much closer to Apple's positions on FRAND than Qualcomm's, but both companies express concerns about arbitration that are worth thinking about.

The path to a FRAND determination is very important -- more than important enough to talk about it, and starting with the next paragraph I will summarize the concerns raised by Apple and Qualcomm. But in the greater scheme of things the parameters of arbitration are not the most important issue relating to the FTC-Google deal. The circumstances under which injunctive relief is available are the most important part of this. An injunction can cause more consumer harm than unfairly high or low royalties -- and an injunction, or sometimes just a credible threat of one, provides a SEP holder with the leverage to become "the dictator of the royalties", which is more than he'll ever be in any reasonably-conducted arbitration. In terms of priorities, I continue to believe that the "defensive use" exception, a recipe for mayhem, should be the first and foremost issue for the FTC to reconsider, especially in light of what's happening between Ericsson and Samsung on the one hand and between HTC and Nokia on the other hand. Microsoft's submission focuses on this concern, while other filings place the emphasis on corporate interests that are not closely related to consumer interests. That said, if arbitration results in unfair terms, that's also a bad thing for consumers, though not as directly as a sales or import ban.

Qualcomm would be much less worried about the FTC-Google settlement if the Commission did not suggest that the process outlined in the consent order should serve as a generally applicable model. Qualcomm's concern is that others are going to follow that process in their dealings with it. It concedes that implementers of standards can raise FRAND defenses, but it wants to be able to pursue an injunction from the start rather than having to go through a FRAND determination process first. It wants leverage. It wants to be the dictator of the royalties rather than have others set royalty rates and other contract terms. And it doesn't want defendants to delay the conclusion of a license agreement.

Section IV of Qualcomm's submission (starting on page 14) addresses "arbitration vs. litigation". Once again, Qualcomm opposes the "general applicability" of the FTC-Google settlement, and it expresses fears that "foreign regulators" might also look at this as a template or guideline. The regulatory agency Qualcomm is presumably thinking of in the first place is the European Commission's Directorate-General for Competition (DG COMP).

Qualcomm notes that "a FRAND licensing commitment to ETSI (or to other SSOs relevant to the cellular industry) does not contain any agreement to arbitrate future disputes, or any waiver of the fundamental and statutory right of recourse to courts of law". In Qualcomm's opinion, "an arbitration requirement should not be made a routine component of [antitrust] remedies". And these are Qualcomm's specific concerns about arbitration:

  1. Qualcomm says that arbitration "tends to result in 'split the baby' outcomes in an effort to find the middle ground, rather than make sharper decisions clearly favoring the position of one side over the other, even if that may be the right result". I agree. I believe Apple is also concerned that, for example, an unjustifiable 2.25% royalty demand by Google countered with a FRAND rate that is only a fraction of that amount could lead an arbitration tribunal to arrive at a royalty in the 1% range. A middle ground it would be, but not a FRAND rate. Qualcomm would probably go into arbitration with a demand that is far more realistic, relative to the strength of its portfolio, than what Google's Motorola has asked for -- and Qualcomm would not want to see a reasonable demand cut in half by the arbitrators. Qualcomm warns that "if arbitration looms over a negotiation, then both parties have a perverse incentive to exaggerate their demands, to increase the gap, in the hopes that by asking for a high-ball (or low-ball) result, the final 'middle ground' ruling from the arbitrator will be at an attractive point". In principle, I agree with Qualcomm, except that I believe that in most cases this will benefit SEP holders. Qualcomm is a special case because it really owns a huge SEP portfolio. It simply can't exaggerate the way that companies with far weaker SEP portfolios, such as Google or Samsung, have done in some ongoing litigations. If Qualcomm wanted to exaggerate by the same factors as Samsung and Motorola, it would have to ask for double-digit, if not triple-digit percentages. For example, a 20% demand by Qualcomm would be much more easily identified as unrealistic than Samsung's 2.4% or Motorola's 2.25% positions, even though a 20% royalty for Qualcomm would be less of a relative exaggeration than Motorola's 2.25%.

    While Qualcomm is right that arbitration has a proclivity for a "middle ground", this is also a problem, even if not to the same extent on average, in litigation. I recently heard Judge Voss of the Mannheim Regional Court mention that in his experience court-appointed damages experts in Germany almost always arrive at figures in the 2% to 5% range -- which is also way too high in most cases given the huge number of patents that need to be licensed to build a wireless device.

  2. Qualcomm furthermore dislikes the notion of cherrypicking of FRAND terms by implementers. The proposed FTC consent decree is designed to limit the scope of arbitration or litigation. Therefore, willing licensees can request arbitration or court determination with respect to only those terms the parties can't agree on. Qualcomm recognizes that this is "a well meant attempt to narrow issues in dispute", but believes it's better to assess the reasonableness of a license agreement as a whole than to create an incentive for implementers to play the following kind of game:

    "Picture, for example, a licensing negotiation in which the prospective licensee has indicated that it would be willing to bear unusual risk in the form of a large, one-time, up-front payment if by doing so it could enjoy a lower running royalty rate. Responding in good faith, the SEP-holder makes a good faith offer including the requested low running royalty rate and a large, one-time, up-front fee. Under the process laid out in the [proposed FTC-Google decision and consent order], upon receipt of a licensing offer from the SEP-holder, the licensee could seek arbitration of the up-front fee alone, thereby locking in the running royalty rate, as well as any or all of the other terms of the agreement--the very terms through which compromises are often reached in a private negotiation. The result is that arbitration would become a tool that infringers could use to seek better terms, without any risk of having to compromise on other terms."

    I consider the above a valid point, though I disagree with what Qualcomm subsequently goes on to say: Qualcomm raises these concerns to argue that the best framework is designed to "get to yes" as quickly as possible, and Qualcomm wants this to happen with the threat of an injunction hanging above an implementer's head. And once again I think that Qualcomm's concern cuts both ways. Pre-arbitration (or pre-litigation) posturing by SEP holders is at least as much of a possibility as pre-arbitration posturing by willing licensees, even though licensees have the unilateral option to initiate arbitration.

  3. Qualcomm's third point in this context is one I don't consider valid in the slightest. Qualcomm basically says that implementers of standards could get the best possible result for their purposes from arbitration and still improve the deal terms by subsequently asserting non-SEPs (which are typically not subject to such rules) against the SEP holder (unless the SEP holder is a non-practicing entity, of course), and then get terms for a "whole-portfolio license" (relating to the parties' SEPs as well as non-SEPs) that result in a reduction of the royalties paid for the SEPs involved.

    While the outcome that Qualcomm describes can of course correspond to what happens in certain cases, I don't see why this would be relevant from an antitrust point of view as long as there is no abuse of non-SEPs. The objective here, in the FTC-Google and wider SEP context, is to ensure that SEPs aren't leveraged anticompetitively to force companies to give away their non-SEPs or license them at rates that are too low. That's because SEPs always raise antitrust issues and come with a FRAND licensing obligation, while non-SEPs don't. Non-SEPs can be worked around, while SEPs cannot. If a SEP holder believes that a cross-licensing counterpart is demanding too much for its non-SEPs (such as a massive reduction of SEP royalties), the solution is to walk out on the deal and work around the non-SEPs involved. Qualcomm implies that SEP holders are generally entitled to whole-portfolio cross-licenses. But they are not. Patents are a property right, but SEPs come with particular obligations, for good reasons.

    From an innovation policy point of view it's absolutely correct and desirable to distinguish between encumbered patents (SEPs and a few others) and unencumbered ones. Anybody can get leverage from SEPs by simply sitting at the standard-setting table and doing a deal with the other participants. In this context I'd like to point to a very interesting empirical study conducted by three European researchers (Rudi Bekkers, René Bongard and Alessandro Nuvolari) on "the determinants of essential patent claims in compatibility standards". Their key finding is that "the involvement in the standardization process is a stronger determinant than the technical value ('merit') of the patent". I've watched many SEP assertions and I've been consistently underwhelmed by the technological merits of the SEPs-in-suit.

  4. I agree with Qualcomm on the next item:

    "Fourth, it is worth noting that arbitration is not an inherently superior dispute-resolution mechanism compared to litigation. Experience teaches that it is not always faster, and not always cheaper. Often, the primary benefit that drives parties to choose arbitration is confidentiality--a benefit that does not appear to be pertinent to the Commission's concerns. The {proposed consent decree] structure, of course, does not mandate arbitration; it merely requires Google to offer binding arbitration. But where arbitration is likely to be the more efficient route and both parties are acting in good faith, SEP owners and implementers will always be free to elect arbitration, so the efficiencies of arbitration, if any, are always within reach."

  5. Qualcomm's fifth and final point is that the proposed deal structure, if it becomes a generally applicable model, results in a shift to a "rate-regulation regime". While Qualcomm is right that the parties understand their own businesses better than arbitrators (or judges and court-appointed experts, for that matter), the problem in a growing number of FRAND negotiations is not lack of knowledge and insight but simply that certain SEP holders make prohibitive demands. Arbitration or court determination of FRAND terms are preferable over a might-makes-right regime in which the threat of lethal SEP-based injunctions determines the outcome.

Apple's arbitration-related concerns are perfectly complementary to those raised by Qualcomm:

  1. Apple's primary concern is that "Google may try to frustrate the arbitration process, cause it to fail in whole or in part, and then seek injunctions upon the claim that it complied with its duties under the Decision and Order". Apple's submission provides specific examples of how Google could derail arbitration in order to later claim that it was willing to arbitrate, but Apple (or any other party) was not a willing licensee because it rejected some of Google's preconditions for arbitration:

    "Arbitration could fail at the outset because the parties are unable to agree on the terms or scope of arbitration. For example, Google might seek to condition its Offer to Arbitrate in unacceptable ways, e.g., through 'creative' interpretations of 'field of use' in Section I.D.4.a or by limiting the scope (and not just individual terms) of the Relevant Licensing Agreement in Section III. Alternatively, in line with the discussion above, Google may decline to participate in an arbitration where it has the usual burden of proof on the question of infringement or another issue."

    Apple's proposed solution is to "include a process to resolve an impasse and require the arbitration to go forward", and to ensure that Google can't benefit from undermining the arbitration process: it should never be allowed to seek an injunction even if arbitration fails.

    This is Apple's priority in connection with arbitration. It additionally makes some other constructive suggestions, which I'll discuss in the remainder of this post.

  2. Apple proposes a "representative set" approach. I previously reported that Apple highlights Samsung and Google's dismal litigation track record with their multijurisdictional SEP assertions. Apple stresses that a SEP holder must prove actual infringement of a valid patent just like any other patent holder. In order to avoid that an arbitration tribunal or court sets a portfolio rate based on an unjustified presumption of essentiality, Apple proposes that a "representative set" of patents from the portfolio in question be chosen and "tested for actual essentiality/infringement, validity, performance benefits of the technology for the accused product, and other issues (e.g., patent exhaustion)". Given that it's not feasible for courts or arbitration tribunals to analyze dozens or hundreds of SEPs in one proceeding, I think Apple's suggestion is a very pragmatic approach. Most declared-essential patents aren't both valid and truly essential, and even truly essential ones aren't infringed if a feature of a standard is optional and not actually implemented. All of these issues must be assessed in order to determine the fair market value of a SEP portfolio.

  3. Apple wants licensees to be entitled "to meaningful discovery into the terms of the patent holder's other licenses, among other evidence critical to determining FRAND license terms in both arbitrations and declaratoryjudgment actions under the proposed framework". In the U.S. discovery goes quite far in federal court. Apple presumably wants to ensure that it will be equally productive in arbitration and in foreign jurisdictions.

  4. By demanding a "transparent, reasoned decision by arbitrators" (though "transparent" doesn't rule out redactions of confidential business information), Apple proposes an approach that "will create a body of decisions", which is a good thing per se, but which runs counter to a key reason for which parties frequently elect arbitration: privacy. In a passage I quoted further above, Qualcomm says that "[o]ften, the primary benefit that drives parties to choose arbitration is confidentiality".

  5. In light of the commercial significance of SEP licensing terms it's absolutely key in Apple's view to have access to a "substantive appellate review". Apple wants to ensure that arbitration rulings will be "subject to judicial review for errors of fact or law". From a rule-of-law point of view this makes sense, but it also makes arbitration less binding. Apple's submission doesn't specify a particular standard of review. What it says sounds like de novo.

  6. Apple proposes, for the method of appointment of arbitrators, "that each party picks one arbitrator and the two appointed arbitrators pick a third arbitrator". This is the most common approach, and Apple wants it to be applied consistently.

  7. Apple wants there to be competition between arbitration organizations and encourages the FTC to add more organizations to its list of qualified arbitration organizations. But there's always a problem with having courts, or arbitration organizations in this case, compete with each other: it may lead them to favor the interests of those who pick the court. In federal court, it's usually the patent holder who sues and picks a venue. In the FTC-Google consent decree context, implementers of standards would potentially benefit from more competition. The other suggestions that Apple makes are also in the public interest, but this one here, while not completely unreasonable, appears too self-serving.

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Qualcomm warns FTC against 'serious judicial challenge' in FRAND enforcement context

Yesterday I quoted and summarized a few select passages from Apple and Microsoft's submissions to the FTC concerning the proposed Google consent decree. Apple and Microsoft are the targets of Motorola's deemed-abusive SEP enforcement activities. Among the two dozen submissions the FTC received there are also some that advocate SEP-based injunctions, most notably from Qualcomm, Ericsson and BlackBerry. Of the submissions made by the pro-injunction camp I consider Qualcomm's letter the most interesting one. In this post I will talk about Qualcomm's aggressive stance; in a subsequent post I'll discuss the concerns relating to arbitration that Apple and Qualcomm have outlined (they arrive at completely different conclusions, but both submissions have in common that they believe arbitration could lead to non-FRAND rate determinations).

Qualcomm's anxiety with respect to the leverage it will get in the future from its vast numbers of FRAND-pledged standard-essential patents (SEPs) becomes ever clearer. In December, a law firm submitted a letter to the ITC on Qualcomm's behalf that poured vitriol over Apple only to be withdrawn a couple days later, presumably because senior management determined that this was the wrong way to express disagreement with a huge customer. Meanwhile that same firm -- Cravath, Swaine & Moore -- has made a submission on Qualcomm's behalf, commenting on the envisioned FTC-Google consent order. The letter contains a thinly-veiled threat that Qualcomm is prepared to take the FTC to court over standard-essential patents should its own pursuit of injunctions against allegedly-unwilling licensees be investigated and held anticompetitive.

The threat is credible given that Qualcomm's profitability very much depends on its ability to leverage SEPs (partly to strike license deals, partly to sell products on the basis that substantial license fees would be demanded anyway). The only antitrust issue that is critical to Qualcomm's business is FRAND. Qualcomm is aware of developments in case law, in federal court as well as the regulatory arena. Yesterday I quoted from a joint Huawei-ZTE filing in an InterDigital case a passage that recalls various high-profile decisions and statements by U.S. courts and governmental agencies over the last year. What Huawei and ZTE seek to leverage in their role as defendants is what Qualcomm is presumably experiencing as a nightmare.

Here's the passage that culminates in the threat of litigation (click on the image to enlarge or read the text below the image):

"Qualcomm has other serious concerns, which we have raised in previous comments in other proceedings. In the interest of space we will cross-reference them here and ask that the [Federal Trade] Commission take careful note of them. First, a general rule against 'seeking' injunctions would not be well-founded as a matter of contract law. Second, the Commission's primary concern appears to be one of excessive pricing in royalty rates, but, wholly apart from the absence of empirical support for any systemic problem of excessive rates, this does not appear to be a proper basis for the exercise of the Commission's jurisdiction under Section 5. Finally, we believe that any categorical threat to pursue regulatory sanctions against SEP-holders for the simple act of 'seeking' an injunction would violate the Noerr-Pennington doctrine. We encourage the Commission to proceed carefully, on a fact-specific and case-by-case basis, to guard against genuine and demonstrated abuses, rather than attempting to rely on a regulatory construct that will for a time confuse the industry, and that will face serious judicial challenge."

The first item basically says that many FRAND pledges cannot be construed to waive the right to seek injunctions. The second one says that concerns about excessive royalty rates don't justify antitrust intervention. The third point is that a couple of Supreme Court decisions provide a certain degree of immunity to a litigant's behavior. The paragraph then concludes with a stern warning. Qualcomm does not say explicitly "we (Qualcomm) are going to sue you", but if a company that has its own antitrust history in connection with SEPs says that the FTC's approach "will face serious judicial challenge", it doesn't mean to say "we (Qualcomm) are not going to do it because we're too nice to sue, but we're afraid that others will". Without a doubt, this is a threat to go to court if the broad lines of the proposed FTC-Google decision and order are ever applied to Qualcomm's pursuit of injunctions.

The message is basically that Qualcomm is not going to accept this kind of FRAND enforcement framework as a consent decree if it's ever going to be in Google's current situation. It wouldn't agree to this, and the FTC (or DoJ) would have to instigate antitrust litigation if it wanted to achieve a similar result. Unlike Google, which also had an interest in putting its antitrust issues in the search engine business to rest, Qualcomm has one and only one concern: a maximum degree of enforceability of FRAND-pledged SEPs. Google decided to take the deal the SEP offered because it felt that there were enough loopholes in it that it wasn't wise to fight over SEPs and complicate a settlement on the search engine side. Qualcomm, however, indicates that it won't waver in its defense of its number one (and two and three) business interest. Everything will then depend on antitrust regulators' determination to defend the public interest. The fact that Qualcomm makes lots of money with SEPs doesn't mean that the standardization system would grind to a halt if SEP holders like Qualcomm couldn't seek sales and import bans -- but the harm to consumers from excessive SEP royalties and abusive injunctions is clear.

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Monday, February 25, 2013

Apple to FTC: Samsung and Google lose most of their cases over declared-essential patents

The FTC has published 25 submissions commenting on the proposed consent decree in the Google standard-essential patent (SEP) abuse case. I'm going to analyze this input in more detail, but there are a few things I wanted to share immediately.

  1. Both Apple and Microsoft, who are the targets of Google's (Motorola Mobility's) SEP-based injunction requests that gave rise to the investigation and the envisioned order, state in their submissions (Apple's letter, Microsoft's letter) that Google still hasn't withdrawn all of its SEP-based injunction requests. Here's what Microsoft says:

    "[Despite the proposed order] Google has not withdrawn all of its pending injunctive relief actions based on FRAND-encumbered SEPs. This is true even though these actions were filed against 'willing licensees,' and this anticompetitive conduct by Motorola, and then Google, is the basis for the Complaint in this matter. We assume that Google's refusal to withdraw its pending claims for injunctive relief means that it interprets the proposed Order to permit it to continue its existing claims for injunctive relief, notwithstanding the Commission's public statement to the contrary. Clarification of the decree in this regard would be appropriate."

    Documents filed on Friday with a U.S. court show that, for example, Google refuses to withdraw its German injunction requests against Microsoft. It is still looking for an opportunity to enforce an H.264 patent injunction it won last year. Here's what Apple says about it:

    "All that said, Google's actions and public statements since the issuance ofthe FTC's Complaint raise concerns that it has yet to get the message. First, Google/MMI continues to deny that it engaged in hold-up and instead blames the victims of its anticompetitive conduct for 'holding out.' Second, Google continues to pursue injunctive relief against Apple in federal court and seeks to exploit the injunction it obtained and enforced against Apple in Germany. Third, Google/MMI continues to demand royalties (in the German rate-setting action and in ongoing negotiations) based on past licenses it negotiated while wielding the threat of injunction. Such licenses are the proverbial 'fruit of the poisonous tree' and cannot be presumed FRAND."

    Footnote 10 of Apple's letter recalls what the FTC itself thought Google would actually have to do now:

    "Remarks of Chairman Jon Leibowitz, Google Press Conference (Jan. 3, 2013), available at ('Google's settlement with the Commission requires Google to abandon its claims for injunctive relief on any of its standard essential patents with a FRAND commitment, and to offer a license on FRAND terms to any company that wants to license these') (emphasis added); Proposed Consent Order, In the Matter of Google Inc., FTC File No. 121-0120, supra note 7 ('Google's settlement with the Commission requires Google to withdraw its claims for injunctive relief on FRAND-encumbered SEPs around the world, and to offer a FRAND license to any company that wants to license Google's SEPs in the future.')."

  2. Microsoft's submission primarily stresses the need to (preferably) drop or (alternatively) narrow the "defensive use" exception. Microsoft says there should be no exceptions to the rule that injunctions cannot be sought against willing licensees. I'm also against self-help: companies should never be authorized or encouraged to take the law into their own hands. As a litigation watcher I see the threat to consumer interests that mutual SEP-based injunction requests such as in the Ericsson-Samsung dispute pose, and how unbelievably far-fetched the theories of some litigants are if they believe they have a benefit from alleging that a patent they have to defend themselves against is standard-essential, which would also happen if someone wants to invoke the "defensive use" clause in order to respond to non-SEP litigation with SEP-based retaliatory injunction requests.

  3. The final paragraph of Microsoft's letter is a suggestion that the FTC could adopt without any modification to the proposed consent decree. Microsoft would consider it useful to clarify that the procedures set forth in the proposed order are not the only basis on which a defendant can argue that the pursuit of injunctive relief is abusive. As Microsoft's letter points out, it's unusual enough that the proposed order in this case "appears to create obligations for third parties if they wish to shield themselves from the injunctive relief actions that Google already relinquished under the reasoning of the proposed Complaint". It should just be clarified that even if a defendant did not follow the proposed procedures, Google or any other SEP holder wouldn't necessarily be "free to seek injunctive relief and freed from its FRAND commitments".

  4. Apple's letter raises the very important point (starting on page 6) that most patents that are declared essential to a standard (by their holders, typically without any independent verification of essentiality) actually aren't -- and if someone wants to get paid for an allegedly standard-essential patent, a defendant must have the right to challenge the validity of the patent and its essentiality in court without having to pay for a portfolio license based on an arbitrated or court-determined value of an unverified portfolio. While the proposed consent decree generally mentions that challenges to validity, essentiality and infringement allegations don't make a company an unwilling licensee, a very recent InterDigital filing in lawsuits targeting Huawei and ZTE shows that some SEP owners nevertheless argue that they should receive royalties even without having to prove that their asserted patents are valid and actually used by an implementer of the standard in question.

    Apple's letter provides some data points on the problem of overdeclaration:

    "The only true check on essentiality today -- at least in the context of cellular SEPs -- occurs in court when a patent holder chooses to assert a SEP and seeks to demonstrate as part of its infringement claim that its asserted patent is standard essential. At most standard setting organizations, patentees unilaterally declare their patents to be essential to a standard. There is no independent verification that patents are truly essential. Further, patentees are often required to declare their potentially essential patents before the standard is determined, which necessarily will result in over-declaration. The incentives to disclose patents, the lack of independent verification, and the disclosure requirements of standard setting organizations have led to significant over-declaration. For example, over 7,300 patents have been declared as essential to UMTS, a 3G cellular standard. Independent third-party analysis suggests that the majority of these patents are not technically essential to the UMTS standard. See PA Consulting Group, Essential Intellectual Property in 3GPP-FDD 17 (May 2006) (finding that of patents studied that were declared essential to 3GPP-FTD standards, including UMTS, only 36% were actually essential); see also PA Consulting Group, LTE Essential IPR: PA's 3GP P-LTE Database and Report 13 (July 2012) (finding that of patents studied that were declared essential to LTE, only 40% were essential).

    SEP holder must also demonstrate that its patents are infringed by the implementer's product and rebut any counterarguments or defenses of invalidity, unenforceability, or exhaustion. Apple's experience has shown that declared-essential patent holders often fail to satisfy their burdens of proof on these issues in litigation. For example, MMI has asserted ten declared-essential patents against Apple in the United States and Germany. Nine of those patents have been found invalid or not infringed (or both). Similarly, Samsung has asserted over 20 allegedly essential patents against Apple. To date, Samsung has lost thirteen decisions (either because of non-infringement or invalidity or both) and won only three. In addition, Samsung has dropped eight other declared-essential patents, tacitly recognizing the defects in those patents."

  5. Again, these are statistical facts: Google (Motorola Mobility) had a hit rate of only 1 out of 10 with its SEP assertions against Apple, and Samsung only 3 (2 of them in its own country, 1 in the Netherlands) out of 24 (if withdrawn patents and cases stayed by courts over doubts concerning validity are included). 3 out of 24 is the same hit rate as 1 out of 8. So Google has won 1 out of 10, Samsung 1 out of 8 if Korea (an outlier in this regard) is included, and 1 out of 22 if it is not.

    Those companies accuse Apple of "hold-out" tactics, but with such sky-high drop-out rates they should perhaps blame it all on the weakness of their own patents rather than blame Apple for taking the position that it "will not [...] capitulate to attempts at hold-up".

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Huawei and ZTE file motion to stay ITC investigation of InterDigital's latest complaint

The ITC investigation of InterDigital's early-January standard-essential patents (SEP) complaint against Samsung, Nokia, Huawei and ZTE is the first one of its kind to have been instituted after the FTC announced a consent decree in the Google (Motorola Mobility) SEP antitrust case. In fact, the envisioned consent decree was announced on the day following the filing of InterDigital's related complaint. China's leading telecommunication hardware makers, Huawei and ZTE, have just brought a motion to stay the ITC investigation. The motion was filed on Friday and entered the public electronic record today. In a February 11 filing with the United States District Court for the District of Delaware, where InterDigital had filed its companion federal lawsuits, Huawei had already announced its intent "to move the ITC to stay the most recently [launched] investigation".

Huawei and ZTE present a united front against InterDigital despite being embroiled in a SEP dispute with each other in various jurisdictions (particularly Germany). They agree that in light of the proposed FTC-Google consent order, a FRAND determination action in federal court warrants a stay of an ITC investigation. What's interesting about this is that so far it used to be the rule that companion (or mirror) lawsuits in federal court were stayed pending final adjudication of an ITC complaint (including appeals). Under the law, defendants are entitled to a stay after the ITC instituted an investigation, and in the cases I watched over the last few years, every defendant moved for a stay. But for SEPs it makes sense to do the opposite thing: the ITC can't set FRAND royalty rates because its only remedy is injunctive relief (import bans and concomitant cease-and-desist orders and bonding requirements), but district courts can do so, and once an implementer of a standard is licensed, there's no more basis for injunctive relief.

Here's the motion (this blog post continues below the document):

13-02-22 Huawei and ZTE Motion to Stay ITC Investigation of InterDigital Complaint by

In late January Huawei had already asked the ITC to postpone the institution of an investigation, but on January 31, the ITC launched an investigation regardless of Huawei's proposal to sort out FRAND licensing issues in federal court and/or resolve another ITC investigation before the new one would start. Another defendant, Samsung, had also requested a postponement on SEP-unrelated grounds. Samsung has meanwhile brought a motion to terminate the investigation with respect to the patents it had a license to when InterDigital's lawyers purchased samples of allegedly unlawful imports. And in their public interest statements filed a few days ago, Nokia (also a defendant) and Huawei complained that InterDigital is trying to leverage the threat of a U.S. import ban to force them into worldwide license deals.

The joint Huawei-ZTE motion reminds the ITC of overall developments in U.S. case law and the procedures that enable a defendant to avoid injunctive relief according to the envisioned FTC-Google consent decree (which procedures Huawei and ZTE claim to have done by requesting a FRAND determination in federal court and declaring themselves bound to its outcome) as well as the SEP-related part of the FTC's previous settlement with Bosch, which disallowed the pursuit of SEP-based injunctive relief altogether. While Bosch is clearer than Google, Huawei and ZTE appear to meet even the requirements of the Google deal:

"The Moving Respondents have also committed to the Delaware court that they will be bound by the district court's determination, and so each of the Moving Respondents unquestionably is a willing licensee with respect to InterDigital's patents."

Huawei and ZTE liken InterDigital's conduct to Google's conduct that resulted in an FTC investigation and (proposed) consent decree:

"InterDigital's behavior with respect to the Moving Respondents is for all relevant purposes identical to Google's behavior as documented in the Consent Order. InterDigital, like Google, participated in the ETSI standard-setting process and declared that its patents may be essential to the standards under development (see Exh. E, Analysis of Proposed Consent Order at 3; cf. Exhs. A-C). Also like Google, InterDigital 'promised to license its patents essential to these standards on FRAND terms, inducing ETSI . . . to include its patents in cellular . . . standards.' (see Exh. E, Analysis of Proposed Consent Order at 3; cf. Exhs. A-C at 2). And like Google, InterDigital 'filed patent infringement claims at the ITC where the only remedy for patent infringement is an exclusion order.' See Exh. E, Analysis of Proposed Consent Order at 3. The FTC explained why this behavior is unlawful when carried out by a company that is bound by FRAND commitments: 'Because of the ITC's remedial structure, filing for an exclusion order before the ITC on a FRAND-encumbered SEP significantly raises the risk of patent hold-up in concurrent licensing negotiations because an exclusion order may be entered by the ITC before a FRAND rate is reached.' Id."

The motion says "there has been a sea change in the way that federal district courts and governmental agencies view the commitment to license patents on FRAND terms". I wouldn't necessarily call it a "sea change" because it's not like SEP holders had easy access to injunctive relief before, but there's certainly been a wave of high-profile decisions (such as the one made by Judge Posner in a case involving Apple and Motorola Mobility) because of so many recent SEP cases:

"In the last year alone, the Department of Justice, the Federal Trade Commission, the Patent and Trademark Office, the United States Court of Appeals for the Ninth Circuit, the United States District Court for the Northern District of Illinois, and the United States District Court for the Western District of Wisconsin have all uniformly concluded that seeking an exclusion order against a party willing to pay FRAND compensation is violative of a patentee's FRAND commitment."

I have reported on all of these statements and cases, and linked each institution in the quote above to a related blog post.

It's easy to predict how InterDigital will react. It will presumably dispute that Huawei and ZTE are truly willing licensees, as it already did in district court, and it's going to repeat the argument made by others before it that the ITC should order import bans rather than let a district court set a FRAND rate. What's harder to predict is how the ITC will decide. In my opinion a stay is warranted in this case.

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Sunday, February 24, 2013

Oracle-Google ruling 'eviscerates' protection for software, says former U.S. copyright chief

A week after Oracle filed the opening brief in its appeal of a district court's ruling on the Android-Java copyright infringement case, amicus curiae briefs were submitted by technology industry leaders (three different briefs), organizations representing creatives, academics, and a former U.S. copyright chief. In a request for more time to respond to Oracle's brief, Google noted the aggregate length of the amicus briefs supporting reversal.

By now I've been able to access and analyze all amicus curiae briefs except for the one filed by Sun founder Scott McNealy and former Sun executive Brian Sutphin, and wanted to do a follow-up on the content of some of the briefs. There are really two categories of amici:

  • major stakeholders (industry players writing directly and through BSA | The Software Alliance, and creatives) stressing the chilling effects that the district court's ruling would have if upheld, and

  • experts who don't represent billion-dollar groups or organizations but bring a wealth of legal and technical expertise to the table.

The briefs from major stakeholders drew almost all of the media attention in this context. They are undoubtedly powerful and persuasive, and backed by an impressive and diverse group of companies. Except for one remark on corporate interests this post will focus on the submissions made by the aforementioned individuals, which I believe deserve more publicity and are going to be extraordinarily helpful to the appeals court because they provide first-rate information from practitioners that calls into question the district court's legal analysis and technical findings.

Amicus curiae briefs are usually unrelated to conspiracies and rivalries

The one thing I wanted to say and further explain in this post about the submissions from industry players is that I disagree with commentators who speculated, at least between the lines, about competitive motives, when it's actually about the issues.

Even if someone might have a reason to hurt a particular rival through an amicus brief, he ultimately won't want to cut his nose to spite his face by taking positions on overarching issues that may come back to haunt him elsewhere. The plausibility test for whether there might be such an agenda in play in a particular case must extend beyond the simple and superficial questions of whether companies compete in certain markets and/or have litigation pending against each other on completely unrelated issues. The hurdle for the plausibility test must be reasonably high because large corporations have interests, not friends, and there have been other intellectual property issues on which companies taking different positions on the Android-Java case were on the same side. The hurdle for the plausibility test should be particularly high if an amicus actually competes with both parties to a dispute, and in my view it's insurmountably high if a given stakeholder actually owns valuable intellectual property that depends on the type of protection he advocates.

A conspiracy theory is likely also baseless if there's a consensus among industry heavyweights. With the BSA membership including Apple, IBM and Microsoft (the latter also submitted a brief together with EMC and NetApp), and with Oracle being the appellant, four of the five largest players in this industry agree that reversal is needed (though they do support interoperability, which is not what Google's selective copying of Java material is about) -- and the only one of the top five companies in IT to promote weak copyright is Google itself, which also happens to be the only large IT company to bash the patent system instead of focusing only on constructive reform proposals.

Former U.S. copyright chief says Judge Alsup's ruling "largely eviscerates copyright protection for some of the most creative aspects of computer software"

In a recent post I discussed the background of Ralph Oman, a former Register of Copyrights of the United States, and mentioned that the headline of his brief stressed the urgent need to reverse Judge Alsup's decision. His brief is in many ways antithetical to the section of the district court ruling entitled "The Development of Law on the Copyrightability of Computer Programs and Their Structure, Sequence and Organization" (which Judge Alsup had concluded with an "apology for its length"). Mr. Oman, who helped shape copyright legislation and is a professorial lecturer, explains how statutory and applicable case law on copyrightability should be interpreted and applied in this context.

Here's Mr. Oman's brief (this post continues below the document):

Ralph Oman's Amicus Curiae Brief in Oracle v. Google by

Mr. Oman's brief warns that the copyrightability-denying "aspect of the [district] court's decision, if not reversed, will chill investment and innovation in the software industry, and retard development of future generations of software, because it largely eviscerates copyright protection for some of the most creative aspects of computer software". The filing also says that "the rejection of copyright protection for the organization of Oracle's software packages threatens to do violence to the very concept of copyright protection of software".

It's difficult to select particular passages from Mr. Oman's highly coherent submission. Still I would like to quote four passages that I believe are exceptionally helpful in understanding some of the problems concerning the district court's ruling.

I think the following example explains quite well the idea of protecting structure, sequence and organization regardless of the protectability of the individual elements of a larger structure:

"Likewise, choreography -- the arrangement and sequences of movements, steps and patterns of dancers -- is subject to copyright protection (17 U.S.C. § 102(4)), even though the underlying movements and steps are not protectable; the options for each movement or step are limited, and each command serves the function of directing the movement of the dancer."

Mr. Oman explains that whether something is copyrightable must not depend on a circumstance that can change over time:

"[U]nder the court's reasoning, even if the Oracle command structure was copyrightable at the time it was created, the later development of a market based around the Java platform could somehow vitiate protection before the end of the copyright term. The fact is that even if the specific market considerations that the court posited somehow existed at the time the software was first authored, it would still have been inappropriate to consider them, as they could not have affected the programmers' creative choices."

In the above context it's key to consider that "[s]oftware concerned with interoperability is no more or less 'functional' than code that enables a program to display images on a monitor or send email; it is a string of commands resulting in a series of actions".

Footnote 9 of Mr. Oman's brief basically says that the district court's ruling was counterproductive with respect to the policy goal of interoperability:

"[...] Oracle points to admissions by Google that Android was not designed to be 'interoperable' with Java applications at all. [...] Assuming this is correct, the [district] court's decision has a decidedly anti-competitive effect: While denying copyright protection to the creator of an original work, it secures a plagiarist's use of non-interoperable software."

In the next and final section of this post you'll see that a group of computer science and engineering professors also believes that the denial of copyrightability for what isn't truly interoperability is against the public interest.

The fourth passage I'd like to quote from Mr. Oman's brief relates to the question of whether the denial of copyrightability in the API context is justified, as Judge Alsup suggested, by the availability of patent protection for software. I discussed this issue in a separate post and said that the two intellectual property regimes at issue -- software patents and copyright -- are complementary. Mr. Oman puts it like this:

"The [district] court's reluctance to grant a '95 year monopoly' seems to stem not just from believing it had to choose between copyright and patent protection, but also from mistakenly equating the copyright and patent monopolies. The copyright monopoly is longer, but much more limited than the short, 'powerful' patent monopoly. An inventor can bar a subsequent inventor from practicing an invention, even if the second inventor had no knowledge of the first and independently created the same invention, and there is no 'fair use' defense to patent infringement. Not so on the copyright side. [...]"

Computer science and engineering professors explain choice in API design and warn against security and stability issues resulting from lack of protection of APIs

In a previous post on the fact that various amici curiae made subsmissions I also talked about the background of computer science and engineering professors Gene Spafford, Zhi Ding and Lee Hollaar. I mentioned Professor Spafford's impressive contributions to key open source projects in the area of computer security, and Professor Hollaar's influential amicus briefs in other IP cases.

After the California trial I saw that some commentators were extremely impressed with Judge Alsup's mentioning of his own efforts to learn Java. While I agree that it's great if judges acquire technical knowledge relevant to IP cases, I think it's important to separate this story from the analysis of how well-reasoned a given ruling is. I don't doubt that Judge Alsup acquired the knowledge he talked about in court, but with the greatest respect, his copyrightability ruling could have been written, even without any knowledge of Java, by anyone who simply decided to adopt Google's arguments. But if some people prefer to talk about background rather than substance, certain amicus curiae briefs should give them pause. I don't think anyone can argue that Mr. Oman knows less about copyright law than Judge Alsup, and with respect to the issues of technical fact that are key to the copyrightability analysis, the three professors have likely forgotten more about programming than any judge will ever know.

The Spafford-Ding-Hollaar brief has the following focus:

"We submit this brief to draw the Court's attention to, and correct what appears to be, the district court’s fundamentally erroneous understanding of the creativity underlying APIs. We do not address the district court's legal reasoning, but we do observe that its holding appears predicated on assumptions that there is only one or a few limited ways to express an API and that expression is dictated by a set of pre-determined functions. Those, assumptions however, are mistaken: for any given problem or use case, an API can be structured and expressed in a vast variety of ways, and that variety reflects the creative choices and subjective judgments of its author. In other words, contrary to the district court's opinion, a huge number and variety of APIs may be written to accomplish the same purpose, and the differences among those APIs are determined by each designer's creativity, experience, and personal preference, and only somewhat, if at all, by any requirements of functionality."

Here's the academics' brief (this post continues below the document):

Spafford-Ding-Hollaar Amicus Curiae Brief in Oracle v. Google by

In my opinion the brief does a great job explaining the creative choices involved in API design. The existence of those choices runs counter to the district court's finding that the asserted code is just functional and not creative. One example is that even for a function that draws a circle, there are alternative solutions. An API can have a function that does nothing but draw circles. It needs few parameters, but it's also a one-trick pony. A drawEllipse function is more flexible, and a circle is just a special kind of ellipse, so you can use that function to draw a circle just by setting the parameters accordingly. And even a drawPolygon function could be capable of drawing circles. The brief explains that there could be a complex variable called ShapeType, which would be an object (so we're talking about a parameter that actually groups multiple parameters), and if one of the parameters it contains specifies that the object has zero sides, the drawPolygon function could also be used to draw a circle.

Those three options for drawing circles are, obviously, not exhaustive, and this is is just one of countless functions in the Java APIs ("the district court incorrectly focused on a single method and failed to address the many other creative choices that go into software API design beyond simply the parameters in a method declaration, including: the class in which the method is defined; the method's exposure to other classes; and the containing class’s relationship to other classes, interfaces, and packages").

The final part of the Spafford-Ding-Hollaar brief explains why APIs protected by copyright will be more reliable and secure (thereby warning against the negative effects of a denial of copyrightability on security and stability):

"D. Copyright Protection Incentivizes Reliable and Secure APIs.

APIs embody the creative expression, competence, and understanding of their original authors. To the extent that copyright protection over the design and structure of APIs prohibits unauthorized changes to APIs, they may help prevent the introduction of anomalous problems, including security, compatibility, stability, and fragmentation that may result from such changes.

If an API is written by an author trained in proper software engineering, safety, and security, the resulting API and code may support critical features and dependencies not explicitly described in the documentation. If someone else with less knowledge of the features and dependencies modifies the API (and the underlying implementation), it may introduce unanticipated vulnerabilities and instability. The versions (and stability) of the software may become fragmented and of uncertain reliability.

Using the blueprint analogy given above, anyone not following the blueprint (e.g., putting in larger or extra windows) may cause unexpected failures (e.g., wall collapse because of loss of load-bearing structure) because not all of the design requirements and responses are explicitly shown in the blueprint. By the same token, we believe that a software API should receive copyright protection to help prevent such failures in information systems."

As you can see above, these three computer science and engineering professors believe that the district judge not only misunderstood some key technical issues but also issued a ruling that, if affirmed, would be undesirable from a public policy point of view. Other amici also raise public policy arguments and generally argue that investment in innovation must be protected by intellectual property rights. The interesting thing about the section quoted above from the academics' brief is that they talk about an additional reason for which end users would be better off if there's a reasonable degree of protection for APIs.

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