Thursday, February 7, 2013

German appeals court takes Microsoft v. Motorola case over SMS layer patent under advisement

In the two leading smartphone patent jurisdictions of the world, the United States and Germany, a number of final district court rulings are coming up for hearings at the appeals courts this year. Various smartphone-related patent and design rights cases have previously been adjudged by appeals courts, but with the exception of two Apple v. Motorola matters that the Munich Higher Regional Court heard in November and December and a UK case over a tablet design right, all those cases were about preliminary injunctions, which are adjudicated on the fast track and, as the word "preliminary" indicates, don't really resolve a dispute (unless the parties happen to settle, but none of the disputes I watch was settled as a result of a preliminary injunction). In 2013 some high-profile decisions that came down after a full-blown proceeding and trial (as opposed to limited briefing and a mere hearing) are going to be heard by appeals courts.

The first appellate hearing on a smartphone patent in 2013 was held today by the Oberlandesgericht M√ľnchen (Munich Higher Regional Court), which is currently the fastest one of the three leading German appeals courts for patent cases. Judge Konrad Retzer, the presiding judge of the court's 6th Senate (a panel of appellate judges), summarized the procedural history of a Microsoft v. Motorola case in which Microsoft won a permanent (but appealable) injunction against the wholly-owned Google subsidiary in May 2012 -- two days after Google formally closed the acquisition it had already announced in August 2011. Within weeks, Microsoft started enforcing this injunction. In November the Munich-based appeals court already held a hearing on the narrow question of adjusting the amount of the security Microsoft had to give in order to enforce the injunction during the appeal. At the hearing counsel for Motorola, from the Quinn Emanuel firm, told the court that the Google subsidiary had lost four months of sales in Germany as a result of Microsoft's enforcement. Microsoft's lead counsel in the Munich cases against Google/Motorola, Bardehle Pagenberg's Dr. Tilman Mueller-Stoy, won a drastic reduction of the bond: from 242 million euros ($308 million) to 18.5 million euros ($23.6 million), which is less than 8% of the original figure.

The argument at today's appellate hearing on the merits was highly duplicative of the debate the parties already had before the district court. I'll just summarize the key issues very briefly. The patent does not cover all multi-part text messages (SMS). The patented invention relates to a layer between the operating system and the applications that relieves apps from the need to handle on their own the fragmentation of text messages longer than 160 characters and, conversely, the reassembly of fragments. This also has the benefit that app developers don't have to make adjustments in the event of any changes to the underlying protocol (which could, for example, result in a new message size limit). Google (Motorola) argues that Android doesn't infringe this patent because it does not provide a single function call that fragments and sends multi-part messages: a first call performs fragmentation, and a second call initiates the transfer. In a smilar fashion, incoming messages are provided to an app in a format that requires a function call to reassemble them (so as to generate a single long text message out of several shorter ones). Microsoft counters that all the apps it tested and analyzed don't do anything in between the two steps. For example, they don't warn the user that a multi-part messages may result in higher charges, giving the user a last opportunity to discard the message. And, as all defendants do, Google (Motorola) argues that the patent is invalid. Just like the lower court, the appeals court would not be able to invalidate the patent in Germany, but it could stay the enforcement of the injunction until the (also Munich-based) Bundespatentgericht (Federal Patent Court) rules on a parallel nullity (invalidation) case, maybe later this year or, more likely, next year.

Judge Retzer and his two colleagues did not indicate any inclination, neither at the outset of the hearing nor during or after the parties' argument. And there won't be any deference to the district court's decision: in this country, the standard of review for such appeals is de novo. That's why I don't want to speculate at this stage. A decision will be announced on April 25, 2013, and I'll report on it then.

It was actually Motorola's -- not Microsoft's -- choice to take what used to be only a US dispute (the US part was started by Microsoft after a license agreement with Motorola had not been renewed for a long time following expiration) to Germany. But Motorola has to date not been able to enforce a German injunction against Microsoft, while Microsoft's later-filed countersuits have been fairly successful. Last year Microsoft won three German patent injunctions against Google's Motorola (two in Munich and one in Mannheim), all of which are enforceable nationwide. These successes have apparently persuaded additional Android and Chrome device makers to take a royalty-bearing license to Microsoft's patents.

Next month will be a very busy month for the German part of the Microsoft-Motorola dispute. On March 7 the Munich I Regional Court will hold a trial at which Google will have to defend itself, alongside its subsidiary Motorola Mobility, against a patent infringement claim targeting the Google Maps Android app (in this context it's worth noting that once again Motorola's party representative at a German court hearing was a Google in-house lawyer; this time around, the Google in-house litigation counsel who attended was Chester Day). There will also be several more appellate hearings in March. As usual in this you-win-some-you-lose-some game, Microsoft also had a couple of Munich lawsuits that didn't succeed immediately, and just like Google is now trying to get Microsoft's injunctions lifted, Microsoft could also win injunctions from an appeals court that a district court denied.

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