Wednesday, July 31, 2013

Bipartisan senators suggest Presidential veto of impending ITC import ban of older iPhones, iPads

In my first, quick reaction to yesterday's United States Senate hearing on "Standard Essential Patent [SEP] Disputes and Antitrust Law", I mentioned that profound concern was expressed at a high level while few references were made to the specific situation concerning the ITC import ban of older iPhones and iPads over a Samsung declared-essential patent, which will take effect in a very few days (August 5) unless it is vetoed by the Obama Administration. But I also wrote that "given the concern of certain senators about the problem of SEP abuse, it's certainly possible that lawmakers have talked to the White House about the Samsung-Apple case". I guessed right. After the hearing a press release was distributed that included, as an attachment, a letter that four United States Senators wrote to United States Trade Representative Michael Froman yesterday. Ambassador Froman is in charge of the Presidential review of the ITC order (the White House delegated this task to the USTR a long time ago). Here's the letter signed by Senators Klobuchar, Lee, Boxer, and Risch (this post continues below the document):

13-07-30 Senators to USTR Letter Samsung-Apple

The signatories are

Three of the four senators were among the signatories of a May 2013 letter to the ITC in the build-up to the Samsung-Apple decision and also with a view to other cases.

The letter to the USTR notes that the senators "took no position on the merits of the cases then, and similarly we take no position on the merits of the case now", but it's a strong statement in and of itself that the senators go on to "urge the USTR to carefully consider" their public interest arguments. The fact that they write a letter to the USTR toward the end of the 60-day Presidential review period is an unmistakable expression of concern and, by extension, supports Apple, which is pushing for a Presidential veto.

Apple is not alone. A recent Wall Street Journal article mentioned AT&T's support (which I also blogged about) as well as that of BSA | The Software Alliance, a group that includes Microsoft, Intel, Oracle and other major tech companies. For the website of Fortune magazine (part of the CNN Money network), Senior Editor Roger Parloff wrote an opinion piece entitled "Obama should overturn an ITC import ban on Apple phones".

The Korea Times correctly summarized the position I took in a op-ed almost two months ago, but in the meantime more information on the ITC ruling has become available and I'm now particularly concerned about the ITC's position that it's legitimate for a SEP holder to condition a licensing offer on a license to the other party's non-SEPs. One of the six chiefs of the ITC, Commissioner Dean Pinkert, also expressed concern over this one. For as much as I usually wouldn't want the ITC to be overruled, this case does raise unique and serious issues. The four bipartisan senators address some of the most important issues at a high level in their letter to Ambassador Froman.

There's a fundamental problem here that needs to be solved. And it would also be regrettable if Apple had to suffer under an outlier ruling by a government agency with quasi-judicial authority.

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ITC judge finds patent troll to be far more reasonable than Google's Motorola Mobility

InterDigital has been listed among "tech's 8 most fearsome 'patent trolls'", and I have serious doubts about its compliance with its FRAND licensing obligations, but the worst is the enemy of the bad. It's quite interesting that the same Administrative Law Judge at the ITC, Judge David Shaw, has not found indications for a lack of "good faith" on InterDigital's part in its negotiations of standard-essential patent (SEP) licenses with Nokia, Huawei, and ZTE, but determined last year that now-Google-owned Motorola Mobility "was not interested in good faith negotiations and in extending a [F]RAND license" to Microsoft.

Judge Shaw's analysis of InterDigital's conduct has recently become available in a public redacted version of his final initial determination on InterDigital's mid-2011 complaint against Nokia, Huawei, and ZTE. The initial determination was made about a month ago and identified no violation of a valid InterDigital patent by any defendant. While Judge Shaw sided with defendants on liability, he threw out their FRAND defenses, as InterDigital told a federal court earlier this month. Until recently it was unknown why he ruled against those FRAND defenses. The public redacted version of the full ID sheds some light on this (though it is heavily-redacted and, for example, does not specify the financial terms discussed between the parties).

The standard Judge Shaw applied in his analysis of InterDigital's compliance with FRAND is the wrong one in my view. The right approach would have been consistent with what an FTC official said at a Senate hearing held yesterday: while patent law is usually set up for exclusion, FRAND-pledged SEPs are fundamentally different. Judge Shaw just argues that the ITC's governing statute doesn't make any dinstiction between SEPs and non-SEPs, and after interpreting InterDigital's commitments to ETSI under French law, he concludes that InterDigital merely had an obligation to negotiate in good faith. By contrast, even if one doesn't consider FRAND and injunctive relief irreconcilable per se except under very rare circumstances not present in this case, it's more common that courts and regulators believe a would-be licensee must act in good faith in order to shield itself from injunctive relief -- the "willing licensee" standard. I have previously criticized the ITC's reversal (or one might even call it a perversion) of the "willing licensee" principle by basically saying that someone who appears to be a willing licensor is entitled to import bans.

I'm also disappointed that the ITC (with the notable exception of one of the six commissioners) continues to take utterly bizarre positions on the antitrust issue of tying. Judge Shaw disagreed with the defendants in this action on the import of InterDigital's insistence on worldwide license deals. For example, Nokia made and InterDigital rejected a U.S.-only license. Maybe the FTC and DoJ should offer a seminar for other government agencies who need to learn about the basics of tying.

Anyway, Judge Shaw looked at the history of negotiations between InterDigital and each of the three defendants in this ITC investigation. These are his defendant-specific conclusions:

  • "Having reviewed the lengthy history of negotiations between InterDigital and Huawei adduced by the record evidence, as well as the arguments raised by the parties, it is determined that Huawei has not shown that InterDigital has negotiated in bad faith with Huawei."

  • "When viewed as a whole, the entire negotiation history between InterDigital and ZTE fails to support ZTE's allegations that InterDigital has breached its FRAND obligations to negotiate in good faith towards a license."

  • The part about Nokia is heavily-redacted, but the conclusion is also that InterDigital met its obligation to negotiate in good faith.

This contrasts with his findings in the Motorola-Microsoft case in 2012:

  • "The offers made to Microsoft show that although Motorola assured the [standard-setting organizations] and the public that it would provide reasonable and non-discriminatory licenses for the patents essential to certain standards, those communications were misleading."

  • "[...] Motorola's statements and conduct toward Microsoft, and also toward [REDACTED/presumably including Apple], show that Motorola's statements to the SSOs were misleading."

  • "The evidence shows that the royalty rate offered by Motorola of 2.25%, both as to its amount and the products covered, could not possibly have been accepted by Microsoft."

  • "Indeed, there is no evidence that any company would agree to the offer that Motorola sent to Microsoft."

  • "[...] the evidence supports Microsoft's conclusion that Motorola was not interested in good faith negotiations and in extending a [F]RAND license to it."

To be very precise, Microsoft's equitable-estoppel defense was also rejected but only because Judge Shaw did not find one of the criteria (reliance) fulfilled. Other than that, he agreed that Motorola's conduct was outrageous, as the above quotes show.

Google is a vocal critic of patent trolls and a driving force behind anti-patent-troll legislation. Judge Shaw's findings related to Motorola's conduct prior to the formal closing of the acquisition, but Motorola's SEP assertions continued when Google controlled the company. This makes it all the more astounding that a judge would find a so-called patent troll to have acted more reasonably in SEP licensing negotiations than a wholly-owned and micromanaged Google subsidiary. Is Google perhaps trying to divert attenton away from its own conduct with a bogeyman called "patent trolls"?

I'm actually not surprised that Motorola's conduct was deemed fundamentally worse than that of InterDigital. InterDigital just wants to monetize its patents. That, too, can be an incentive to make supra-FRAND demands. But at the end of the day one-way licensing is "only" about money, while companies like Samsung and Motorola leverage SEPs and the threat of injunctive relief and/or excessive damages/royalties based on SEPs in order to force other parties into cross-license agreements involving non-SEPs that they (Samsung and Motorola) infringe. If the goal is to get access to non-SEPs, asking for a lot of money is not enough: only prohibitive demands can help achieve that goal. InterDigital is very demanding, and it appears that it engages in conduct that antitrust authorities should investigate from a tying point of view, but at the end of the day it's interested in doing cash-only license deals, unlike Samsung and Motorola. (The ITC is, of course, happy to give leverage to any SEP holder, regardless of strategic considerations, provided that liability is established, which is rarely the case.)

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Tuesday, July 30, 2013

Senators are concerned about abuse of standard-essential patents, looking past iPhone 4 import ban

I just watched the live webcast of today's hearing of the Subcommittee on Antitrust, Competition Policy and Consumer Rights of the Judiciary Committee of the United States Senate on "Standard Essential Patent [SEP] Disputes and Antitrust Law". Here's a quick, first reaction:

There's profound concern, and some kind of legislative action may very well be taken, but things take time. In practical terms it's obvious that legislation can only change the framework for future cases and won't affect the import ban Samsung won from the ITC against certain older iPhones and iPads, which will take effect in a few days unless vetoed or stayed. That said, some of the testimony urged action, with only Qualcomm (who sent an incredibly smart, gifted and charming speaker who did his best to downplay the issue) arguing that FRAND works well except for problems at the margins that inevitably arise when competitors go to court, and there was apparently also a consensus among subcommittee members that there are indeed serious issues deserving attention. Whether these early-stage developments on Capitol Hill will influence the U.S. government's decision on whether to veto the ITC import ban is another question but they might.

I've spent a lot of time on FRAND issues (mostly, but not exclusively, in connection with SEPs, and when I hear people talk about it, I look for certain indicators of an understanding of the key issue -- indicators of whether they "get it" or are confused (like the majority of the ITC) by some of the propaganda relating to "reverse hold-up", or "holdout". I liked most of what I heard at today's hearing. When the chairwoman of the subcommittee, Sen. Amy Klobuchar (D.-Minn.), basically explained that standard-setting itself raises an antitrust issue -- she referred to "competitors deciding what technology becomes part of a standard" -- and explained the difference between pre-standard-setting competition and post-standard-setting lock-in, I immediately saw that there's tremendous awareness for the issue of SEP abuse. A witness from the FTC, the agency's chief IP counsel Suzanne Munck, and Intel's Sr. VP and General Counsel Douglas Melamed also emphasized this. They're obviously experts. But if politicians who deal with a multitude of political issues are aware of the core of the SEP abuse problem, then that's a really good sign.

Intel's Mr. Melamed said that SEP abuse is a tax on industry and innovation and noted that SEPs themselves are often insignificant except for their inclusion in a standard, which gives their owners leverage. As a litigation watcher I share this view. The inventive contribution made by the average SEP is typically so limited that the same patent would have very little, if any, commercial value as a non-SEP because it would be so easy to work around (often in superior ways) if there wasn't a standard that prescribed the use of a particular technique, ruling out all alternatives regardless of their technological merit. The Motorola SEPs at issue in the Microsoft v. Motorola FRAND contract dispute may be of exceptionally low value, but I was also underwhelmed by the other SEPs I've seen so far in the ongoing smartphone disputes. Intel also noted that most of the declared-SEPs asserted against it so far weren't actually found essential in litigation, an experience shared by Apple and others.

While I'm not enthusiastic in all respects about the FTC's just-finalized consent order and decree in the Google (Motorola) SEP case, which is useful in some ways and a missed opportunity in some other ways, I support pretty much everything that its chief IP counsel Mrs. Munck said at today's hearing. She, too, agreed that there is an issue that must be dealt with, and her testimony included a ringing endorsement of Judge Posner's position, relating to the eBay v. MercExchange standard, that a patent holder who makes a FRAND pledge will have a hard time showing that monetary compensation is inadequate and an injunction is needed. She explained the fundamental difference between the usual situation in patent law, which is a law set up for exclusive use, and a situation in which someone is willing to license broadly. Mrs. Munck said she was part of the team that submitted an amicus brief in support of Judge Posner's ruling. That appeal will be heard by the Federal Circuit on September 11, 2013.

It's clear that lawmakers and regulators would like standard-setting organizations to solve the problem so they don't have to do it themselves, but Intel explained that SSOs need a consensus (especially if they want to change FRAND licensing rules with expect to standards that were set years ago) and certain patent holders with an agenda to use SEPs aggressively make it impossible to reach that consensus.

The only thing I found really annoying at today's hearing were certain attempts to distract from the SEP issue by claiming that there are more fundamental issues, such as patent quality. I don't mean to suggest that everyone who raised those broader issues at today's hearing had an agenda to distract, but distraction was certainly the effect. Dr. John Kulick, a Siemens employee speaking only in his capacity as the chair of the IEEE's Standards Association Board, stressed the need for patent quality. Higher patent quality would obviously mean fewer patents and presumably fewer assertions of declared-SEPs of low quality. But SEP hold-up is unacceptable and pernicious regardless of quality. I'm all for patent quality and have criticized the quality of patents of all sorts (SEPs and non-SEPs alike) on many occasions, but I don't think SEP hold-up is closely related to that other issue (no matter how important it is in its own right). Qualcomm alleged that others conflated SEPs with issues relating more generally to litigation and accurately noted that the vast majority of patents-in-suit in the ongoing smartphone-related patent cases are non-SEPs. That's true if you count the number of patents asserted; it's not true in terms of the damage they can do or could have done. I very much agree with the FTC that even if FRAND works well most of the time and litigation is less prevalent than licensing, we "still need a means to determine what happens in a FRAND dispute". (As for Qualcomm's claim that there isn't that much litigation, Intel made a strong point by noting that the mere threat of SEP-based injunctions often results in settlements and license agreements on supra-FRAND terms.)

Toward the end of the hearing Senator Chuck Schumer (D-N.Y.) wanted to promote his legislative proposal in the patent trolls context, making it difficult for the witness to answer his off-topic question. Sen. Schumer talked about a start-up that has allegedly gone out of business because of patent assertions and about entrepreneurs who are concerned, but I'm not aware of a single case in which a patent troll by any definition (broad or narrow) has asserted a SEP against a start-up (if anyone knows of such a case, please do let me know).

There were very few references to the Samsung-Apple situation and the impending ITC import ban. Today's hearing was more of a high-level discussion of the issue. I don't know whether there's some activity behind the scenes, but given the concern of certain senators about the problem of SEP abuse, it's certainly possible that lawmakers have talked to the White House about the Samsung-Apple case.

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Apple and Google's Motorola drop 14 patents from litigation in the Southern District of Florida

In connection with the patent dispute between Apple and Motorola Mobility, the Google subsidiary's assertions of FRAND-pledged standard-essential patents (SEPs) have recently received most of the attention (allegation that Motorola demanded more than 12 times the royalty from Apple that it charged others, finalization of FTC-Google consent decree, upcoming Federal Circuit hearing on the "Posner appeal"). But Motorola is also asserting some non-SEPs against Apple (and, of course, all of Apple's assertions against Motorola relate to non-SEPs), such as the infamous, clinically-dead push notification patent is is still enforcing against Apple in Germany. In the United States, a Motorola ITC complaint against Apple involving SEPs and non-SEPs was dismissed (and is being appealed). And between 2010 and 2012 Motorola asserted a dozen non-SEPs against Apple in the Southern District of Florida, where Apple countersued over the same number of patents.

The 24-patent Miami litigation is currently scheduled to go to trial in August 2014. Judge Robert N. Scola, the federal judge presiding over this case, was thoroughly disappointed that the parties couldn't agree on how to narrow their case without asking the court to provide a large number of claim constructions as guidance to aid that process. As a result, he pushed back the case by four months, which is more of a problem for Google (which still has nothing to show in U.S. litigation in terms of leverage from the $12.5 billion Motorola deal) than for Apple, whose focus is clearly on the dispute with Samsung.

Yesterday (Monday, July 29 2013) Apple and Motorola filed a stipulation to dismiss a total of 14 patents from the Miami case. Apple had previously dropped two patents (though it reserved some rights subject to what happens on appeal), so the case was down from 24 to 22 patents. Under yesterday's stipulation, Motorola drops eight patents and Apple withdraws six, restoring parity. Subject to the court's (very likely) approval of this stipulation, either party will be asserting four patents going forward. Some of the dismissals are with prejudice and some without. To the extent that there is prejudice, it only bars reassertions of those patents against the accused products/services in this action and those that are no more than colorably different. In other words, if new infringement issues arise in the future relating to the same patents, they can be litigated again.

A couple of Apple's withdrawals relate to Motorola's set-top box business, which has meanwhile been divested.

It appears to me that the parties are, not surprisingly, focusing on patents that could give them some leverage should they obtain injunctive relief and have put some patents with reasonably-promising damages claims on the back burner, knowing that damages awards are unlikely to have too much impact on the terms of a future Apple-Google settlement. There's one notable exception: Apple's '560 patents (for details see list of remaining patents-in-suit further below) has already expired, but it might give Apple a damages claim against the acquirer of Motorola's set-top box business.

For the complex procedural history of this case, let me refer you to my previous posts, and the two posts on the Miami litigation that I just linked can serve as a starting point. I'm now going to list the patents that the parties dropped and the ones that are still in the case.

Patents dismissed by Apple under yesterday's stipulation

Dismissals with prejudice:

  • U.S. Patent No. 5,594,509 on a "method and apparatus for audio-visual interface for the display of multiple levels of information on a display"

  • U.S. Patent No. 5,621,456 on "methods and apparatus for audio-visual interface for the display of multiple program categories"

  • U.S. Patent No. 7,657,849 on "unlocking a device by performing gestures on an unlock image" (this is the original slide-to-unlock patent; a newer, optimized version, the '721 patent, is among the patents dismissed without prejudice)

Dismissals without prejudice:

Patents dismissed by Google (Motorola) under yesterday's stipulation

Dismissals with prejudice:

Dismissals without prejudice:

The parties' eight remaining patents-in-suit

Motorola's patents-in-suit:

Apple's patents-in-suit:

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Monday, July 29, 2013

Microsoft, Google disagree on jury instructions, verdict form for next month's FRAND trial

Exactly one month before the breach-of-FRAND-contract jury trial scheduled for August 26, 2013, Microsoft and Google filed their proposed jury instructions on Friday. A 45-page document contains and explains the instructions the parties agreed upon; a 140-page statement lays out the disputed instructions and the parties' arguments for or against certain proposals.

The stakes are high, and no one can blame the parties to a dispute like this for fighting for optimizations in their favor. Judge James L. Robart, the ever-more-famous federal judge presiding over this litigation in the Western District of Washington, fully anticipated this. He recently wrote that "the real fight in this is going to be jury instructions".

The parties' filings also reflect various disagreements that have been the subject of dispositive motions (summary judgment, Daubert) or will be the subject of motions in limine (motions to exclude argument or evidence). In order to discuss the 185 pages filed on Friday one would basically have to sum up the whole case. I've read everything in detail, but I believe it will make more sense to go into detail on the jury instructions the court adopts in the weeks ahead than on what the parties propose. It's no surprise that Google's Motorola favors defendant-friendly standards and would like to make the case more complex (for example, by distinguishing between different legal entities, trying to capitalize on the fact that Motorola Mobility was spun off of Motorola after this litigation began and that Motorola was then renamed Motorola Solutions, as well as on the existence of a wholly-owned Motorola Mobility subsidiary named General Instrument Corp., which holds the video codec patents -- but not the WiFi patents -- at issue in this litigation).

Microsoft would like the court to provide to the jury a detailed summary of its findings and rulings to date, which Motorola obviously seeks to avoid.

The continuing fight over the legal standard for the duty of good faith and fair dealing, which accounts for a significant part of the disagreement on jury instructions, is no surprise: the parties already addressed this question at the beginning of this month. The jury instructions suggest to me that the number one issue in this context is whether bad faith will be described to the jury as a requirement for a finding of a breach of contract (which is what Google proposes) or whether the question can be resolved by considering "blatantly unreasonable" the initial demand made by Motorola in 2010. If blatant unreasonableness is sufficient (regardless of the bad-faith issue) for a finding of breach, then the jury may not even have to address it. Microsoft's motion for partial summary judgment said the following:

"No reasonable juror could find a sticker price of $54 million for a standard Ford Taurus commercially reasonable, or a real estate listing of $800 million for an ordinary 3-bedroom house in Seattle commercially reasonable--and those demands exceed the true value of those goods by the same factor as Motorola's H.264 demand did the actual [F]RAND royalty."

The part of the filings on jury instructions that I believe is most interesting to discuss in a blog post like this is found toward the very end of the 140-page file of disputed instructions and involves the parties' proposed verdict forms. That's the most efficient way to learn about the key issues in next month's trial.

Microsoft's proposal comes down to three questions:

We, the jury, provide the following answers to the questions submitted by the Court:

Question 1: Do you find that Microsoft has proved by a preponderance of the evidence that Motorola breached its [F]RAND licensing commitment to the IEEE?

YES __________ NO __________

Question 2: Do you find that Microsoft has proved by a preponderance of the evidence that Motorola breached its [F]RAND licensing commitment to the ITU?

YES __________ NO __________

If you answered 'yes' to either Question 1 or Question 2, please answer Question 3.

Question 3: Please write the amount of monetary award to which you find Microsoft entitled for Motorola's breach. If you find that Motorola breached its [F]RAND licensing commitment(s), but Microsoft has not proven a specific amount of damages, please enter a nominal damages amount that is greater than $0.00 but does not exceed $1.00.

The standard at issue in this case that was developed by IEEE is 802.11, the WiFi (WLAN) standard. The ITU standard relevant to this case is H.264 (a video codec standard).

Motorola raises various objections. It's against a single damages award involving both standards at issue in this case; it doesn't want the jury to be told that it can award nominal damages; and it wants the jury to consider its affirmative defenses. Motorola's counterproposal features three times as many questions:

WE THE JURY, in the above-entitled case, find as follows:

IEEE Contract Claim

We have assumed that Motorola has entered into a contract with the Institute of Electrical and Electronics Engineers ('IEEE'), and that Microsoft is a third-party beneficiary to that contract.

Question No. 1.

Has Microsoft proved by a preponderance of the evidence that its claim relating to the IEEE was ripe for decision at the time Microsoft brought this action?

Yes ___ No ___

If you answered yes to Question 1, then answer Question 2. If you answered no, skip to Question 5.

Question No. 2.

Has Microsoft proved by a preponderance of the evidence that in light of the facts and circumstances Motorola Mobility, LLC, Motorola Solutions, Inc., and General Instrument Corp. breached a contract with the IEEE?

Yes ___ No ___

If you answered yes to Question 2, then answer Question 3. If you answered no, skip to Question 5.

Question No. 3.

What are the damages incurred by Microsoft, if any, as a direct and/or foreseeable result of Motorola having breached a contract with the IEEE?


Question No. 4.

Has Motorola proved by a preponderance of the evidence that Microsoft failed to use reasonable efforts to mitigate damages on its claim relating to the IEEE, and the amount by which damages would have been mitigated?

Yes ___ No ___

If you answered yes to Question 4, any damages awarded for the claim relating to the IEEE in Question 3 must be reduced by the amount of damages that Microsoft failed to mitigate.

ITU Contract Claim

We have assumed that Motorola has entered into a contract with the International Telecommunication Union ('ITU'), and that Microsoft is a third-party beneficiary to that contract.

Question No. 5.

Has Microsoft proved by a preponderance of the evidence that its claim relating to the ITU was ripe for decision at the time Microsoft brought this action?

Yes ___ No ___

If you answered yes to Question 5, then answer Question 6. If you answered no, do not answer any more questions.

Question No. 6.

Has Microsoft proved by a preponderance of the evidence that in light of the facts and circumstances Motorola Mobility, LLC, Motorola Solutions, Inc., and General Instrument Corp. breached a contract with the ITU?

Yes ___ No ___

If you answered yes to Question 6, then answer Question 7. If you answered no, skip to Question 9.

Question No. 7.

What are the damages incurred by Microsoft, if any, as a direct and/or foreseeable result of Motorola having breached a contract with the ITU?

Attorneys Fees and Litigation Costs $_____________

Distribution Center Relocation Costs $_____________

Total $_____________

Question No. 8.

Has Motorola proved by a preponderance of the evidence that Microsoft failed to use reasonable efforts to mitigate damages on its claim relating to the ITU, and the amount by which damages would have been mitigated?

Yes ___ No ___

If you answered yes to Question 8, any damages awarded for the claim relating to the ITU in Question 7 must be reduced by the amount of damages that Microsoft failed to mitigate.

Unclean Hands

Question No. 9.

Has Motorola proved by a preponderance of the evidence that Microsoft is asserting its claims relating to the IEEE and ITU with unclean hands?

Yes ___ No ___

Microsoft objects to the separate references to different corporate entities. It says the affirmative defenses Motorola wants the jury to address aren't properly before the jury. Microsoft also rejects the burden of proof on ripeness since Motorola has the burden of proof for its affirmative defenses. And Microsoft insists on the possibility of nominal damages.

In the coming weeks various pre-trial decisions will come down, including the ones on jury instructions and the verdict form, and I'll keep an eye on these developments.

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Sunday, July 28, 2013

USPTO hands down final (but not really final) rejection of Apple's pinch-to-zoom API patent

Between 1 AM and 2 AM local time on Sunday, Samsung's counsel in the intellectual property dispute with Apple notified the court of a "final" Office action by the United States Patent and Trademark Office (USPTO) rejecting all claims of Apple's pinch-to-zoom API patent, U.S. Patent No. 7,844,915 on "application programming interfaces for scrolling operations", including its claim 8, which one federal jury found infringed by numerous Android-based Samsung devices about a year ago and with respect to which another jury will have to redetermine damages in November 2013 for a dozen of those products (the retrial is about 13 products, 12 of which were found to infringe this patent).

Samsung claims to have a workaround in place for the '915 patent that makes no difference to end users but steers clears of infringement, which Apple disputes.

Based on Apple's damages claims, the pinch-to-zoom API patent is the most valuable multitouch software patent at issue in the first Apple v. Samsung litigation in the Northern District of California, but most of the damages in that case relate to design patents. Also, I believe that the patents at issue in the second Apple v. Samsung case in San Jose, scheduled to go to trial next spring, are, on average, considerably more valuable than the ones asserted in the first case.

Here's the cover page of the "final" Office action (this post continues below the document):

13-07-26 Cover Page Final USPTO Action Rejecting Apple's '915 Pinch-To-zoom API Patent

I put "final" in quotes and said "not really final" in the headline because one can easily get confused by the terminology in U.S. patent reexaminations. Most of the time that you hear about "final" in connection with a reexamination, the way to look at it is a famous Churchill quote: "Victory is never final, defeat is never fatal, courage is all that matters." And courage is not in short supply at Apple and Samsung.

In this case, the "final" Office action is merely the second decision in a process that would take years (until mid-2017 or later) unless Apple successfully defends the patent before all appeals have been exhausted. The first Office action concerning this patent came down in December. Thereafter, Apple had its first opportunity to respond, and now, after the "final" Office action, it has another two months to argue that the patent is valid. The asserted claim of another patent-in-suit in the same litigation, claim 19 of the '381 ("rubber-banding" or "overscoll bounce") patent, was had the same procedural status in April only to be affirmed in June. I can't predict whether the same will happen to the asserted claim of the '915 pinch-to-zoom API patent. I wouldn't underestimate the hurdle Apple faces now. The "final" Office action finds claim 8 of the '915 patent anticipated by one prior art reference and obvious over the combination of two others, as you can see in the detailed version of the final Office action, which I uploaded to Scribd.

The "final" Office action does not meet the criteria laid out by Judge Koh in April when she denied Samsung's motion for a stay without prejudice, allowing a new motion only if an asserted claim is found invalid after the USPTO's Central Reexamination Division is done with it (at which point Apple can appeal the decision to the USPTO's Patent Trial and Appeals Board (PTAB), and subsequently to different courts. Judge Koh didn't say that she would necessarily order a stay in that case, but at least she would be willing to consider. The rubber-banding patent would have been Samsung's best shot, but its relevant claim was affirmed. For the pinch-to-zoom API patent time is not on Samsung's side. But Samsung has two other initiatives going to delay the limited damages retrial, one relating to Apple's damages theories and one concerning an alleged narrowing (in the reexamination proceedings) of the scope of the rubber-banding patent. If Judge Koh felt that at least one those motions might have merit but represents a close call, then the fact that the asserted claim of the '915 patent remains under reexamination pressure could play a role in her decision-making. But it's still not too likely that the November retrial will be postponed, even though Samsung definitely leaves no stone unturned in its tireless efforts to prevent Apple from obtaining remedies.

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Friday, July 26, 2013

Apple says Motorola demanded more than 12 times the rate it charged others for the same patents

This week the United States Court of Appeals for the Federal Circuit scheduled its hearing on the Apple-Google (Motorola) cross-appeal of Judge Posner's dismissal of a two-way patent infringement action in the Northern District of Illinois in the late spring of 2012. The "Posner appeal" will be heard on September 11, 2013. There's another, less famous but also rather important Apple-Motorola FRAND matter pending before the Federal Circuit: the appeal of Judge Barbara Crabb's November 2012 dismissal (initially with, ultimately without prejudice) of a FRAND contract and antitrust action in the Western District of Wisconsin. The appellate hearing in this case will most likely be held in the spring of 2014. This week Apple just filed its opening brief.

Google's Motorola is appealing Apple's partial summary judgment win in Wisconsin and still believes the dismissal should have been with prejudice. But it doesn't want the Federal Circuit to adjudge this matter in the first place: it believes this appeal should have been brought in the Seventh Circuit (where Judge Posner is an appellate judge; for the Chicaco infringement case he was sitting on a district court by designation). The Federal Circuit declined to agree with Google at this stage, but allows it to raise jurisdictional arguments in the further process.

The "Posner appeal" involves standard-essential patents (SEPs) asserted by Google's Motorola and non-SEPs asserted by Apple. With respect to both categories of patents it's about the standard for remedies in infringement cases: injunctive relief and damages. The "Wisconsin appeal" is not about remedies in an infringement case but about the enforcement of a FRAND pledge under antitrust and contract laws, such as by asking a court to obligate a SEP holder to make an offer on FRAND terms ("specific performance" of contractual obligations). So it's entirely SEP-specific.

The Motorola-Apple dispute, which started in October 2010, has a complex procedural history. Even the "Posner case" at some point passed through the Western District of Wisconsin, but Judge Crabb passed it on to "a kind judge in Chicago who enjoys trying patent cases" -- i.e., Judge Posner. Subsequently, Apple would have liked to see the two cases consolidated in Illinois, but just to be clear, the procedural origin of the Wisconsin FRAND antitrust and contract case is that Apple brought counterclaims to Motorola's ITC complaint, and counterclaims must be immediately removed from ITC investigations to a district court. Apple selected Wisconsin for this purpose. The ITC investigation went nowhere: the U.S. trade agency tossed the remainder of Motorola's complaint (one non-SEP) in April 2013. In August 2012 the ITC had already sided with Apple on three Motorola patents, including a SEP that a judge held Apple (in an April 2012 preliminary ruling) to infringe. Two Google appeals relating to that one ITC investigation are before the Federal Circuit (1, 2).

Now that I've outlined the procedural background of this appeal and how it relates to the higher-profile "Posner appeal", let me show you the public redacted version (published today) of Apple's opening brief and then discuss what it tells us about the Apple-Motorola (by now, Apple-Google) dispute and the issues on appeal:

Apple Opening Brief in Appeal of Wisconsin Dismissal

The most interesting economic information is that Motorola, according to the brief, "demand[s] that Apple take a license at a rate that was more than 12 times what Motorola was charging other licensees for the same technology--a rate that was unfair, unreasonable, and decidedly discriminatory". The public version of the brief obviously does not contain any such thing as a list of various Motorola license deals. But it becomes clearer and clearer that Motorola's 2.25% demand is unrealistic and not supported by the deals it actually concluded. Apple says that the demand, corresponding to about $12 per iPhone, "was more than 12 times what Apple was already paying to license Motorola's SEPs", apparently referring to what Apple was paying indirectly through the use of Motorola-licensed baseband chips. What lends further credibility to Apple's position is the fact that the Mannheim Regional Court indicated last month that it was "rather optimistic" on Google's (Motorola's) part to argue that its existing license deals support its 2.25% demand. (Unlike the Federal Circuit, the Mannheim court is the one Google's Motorola used to love more than any other in the whole wide world, but that court wants to get things right more than it wants to be loved.)

It's now important to look at Apple's $1-per-iPhone position, which it took shortly before the Wisconsin trial that never took place because the court considered this an unacceptable precondition, in light of these numbers. Apple's $1 position wasn't arbitrary. Apple looked at what its baseband chip suppliers were actually paying to Google's Motorola and didn't want to pay more. (Apple also has a patent exhaustion-related lawsuit going against Motorola in the Southern District of California, where Qualcomm is based.)

Apple explains in its brief that it would have accepted that kind of rate just to "buy litigation peace and move on" even though Google's Motorola has thus far failed to prevail on any of its SEP infringement claims against Apple:

"Motorola has sued Apple in various forums for infringement of eight SEPs (presumably, its eight strongest SEPs) and is batting 0-for-8 in establishing liability in U.S. actions. Motorola asserted the '223 and '697 patents before the ITC, but the Commission determined that the '223 patent was obvious and that Apple did not infringe either patent. [...] Motorola asserted the '898, '559, '516, '712, '230, and '193 patents in [the "Posner case"]. Motorola withdrew the '516 and the '230 patents from suit. On summary judgment, the district court found the '193 patent invalid and the '712 and '559 patents not infringed, and concluded that Motorola could not prove damages or entitlement to an injunction as to the '898 patent."

The fact that FRAND determinations are typically not based on a full and final adjudication of essentiality/infringement and validity raises very interesting questions for courts setting rates based on such concepts as a hypothetical Georgia-Pacific negotiation (as Judge Robart did in his Microsoft v. Motorola rate-setting opinion in the Western District of Washington, and as Judge Crabb might have done if she hadn't canceled the trial in the decision that gave rise to this appeal here). I'm not going to go into more detail on this complex question here and now, but I do wish to recommend Professor Thomas Cotter's Comparative Patent Remedies blog, which discusses the impact of uncertainty regarding liability on FRAND negotiations and probabilistic rate-setting decisions from time to time.

For the purposes of this blog post here, suffice it to say that Apple's $1 position wasn't nearly as arrogant or whimsical as it might have appeared at the time. It was the price Apple was willing to pay even without Motorola having proven Apple's actual use of a single valid Motorola SEP, just to put this issue behind it. Apple didn't rule out paying more. As its appeal brief explains, its position was and still is that Motorola had and has an obligation to offer a FRAND rate -- while Apple does not have an obligation to accept a court's determination. Even without Apple accepting the determination, the parties would have had additional, valuable guidance in further negotiations. Judge Crabb agreed with Motorola that this would simply allow Apple to use the court's rate-setting decision (and the requested order of the "specific performance" by Motorola, i.e., an offer Motorola would have been required to make so as to comply with its FRAND contract) as a bargaining chip and try to negotiate the rate down from there. Apple's position on this is basically that whatever may happen after an offer, the offer must be made. Up to $1, Apple would have just bought peace regardless of whether Motorola would ever prevail on a single U.S. SEP. Above that rate, Apple "would have had to make the difficult business judgment whether to accept the license or the litigation risk inherent in continuing to challenge the essentiality, validity, and exhaustion of Motorola's patents". Apple doesn't say so, but this "business judgment" obviously relates, in practical terms, to negotiations: Apple might have told Motorola that the court set a rate of $X, and if Motorola accepted 80% of $X, Apple would do a deal, but above that, Apple would continue to litigate. Then Motorola could have said "OK, we'll keep suing you", or it could have said "80% is not enough, but if you give us 85%, we won't keep fighting for the remaining 15%". According to Apple, "that is the choice that Motorola committed to give every business in Apple's position" -- through its FRAND pledge.

I'd like to point out that Judge Robart, contrary to the way some litigants and commenters now portray his position on this, never said that there's an absolute, indispensable requirement for an implementer to commit to accepting a court-determined rate. In his Microsoft v. Motorola case, Microsoft made that commitment, and it was important to Judge Robart when he barred Motorola from enforcing a set of German SEP injunctions against Microsoft. That's different from the Wisconsin case.

Judge Crabb not only canceled the trial because she disliked Apple's position but she also declined to issue declaratory judgments on certain questions such as whether Motorola's 2.25% ($12 per iPhone) demand was consistent with FRAND. Apple also wants to get those DJs now.

The FRAND rate-setting part of the Wisconsin case is closely-related to the FTC consent decree and order in the Google (Motorola) SEP antitrust case, finalized this week. Apple's appeal brief still refers to the FTC's original finding (in January 2013) of anticompetitive conduct by Motorola, which the FTC subsequently dropped in order to make a concession to Google. But the FTC confirmed that Google can still seek injunctions against Apple, as it is doing in its appeals of the Posner and ITC decisions. It just can't enforce injunctions without complying with the consent order, which involves rate-setting. So far, Motorola has been unable to prevail over any of its U.S. SEPs against Apple, and as long as it doesn't, Apple can simply wait. But if Google ever does win a favorable U.S. SEP liability ruling, Apple is going to need a rate-setting decision by a U.S. court (I don't think it's enthusiastic about the prospect of arbitration) -- and the Wisconsin case could already have provided one, had it not been dismissed for what Apple believes are all the wrong reasons.

I've previously stated that I agree with Apple's take that a FRAND promise is comparable to an enforceable options contract: Google's Motorola must give Apple the option to take a license on FRAND terms. But an option is not an obligation, and if Apple convinces the Federal Circuit of this, then this will have important implications for many FRAND cases.

Another legal issue in this appeal also relates to the FTC investigation: Apple is appealing Judge Crabb's summary judgment against its antitrut claims based on the Noerr-Pennington doctrine that lends a fair amount of immunity to a party's defense or assertion of legal rights in an antitrust context. The FTC rejected claims by public commenters that Noerr-Pennington puts SEP assertions beyond the reach of antitrust enforcement. Apple is now arguing that its antitrust claims against Google's Motorola are based not merely on its litigation (even though its damages claims were specific to the cost of its legal defense) but that the anticompetitive wrongdoing began with Motorola's alleged deceipt of standard-setting organizations, making a FRAND promise it didn't ultimately honor and delaying disclosures of potentially essential patents until after adoption of a standard. Apple, which relies in no small part on the Third Circuit's Broadcom-Qualcomm decision, makes a policy argument:

"To hold otherwise is to declare that Apple cannot pursue a blatant antitrust violation because it so far has refused to capitulate to Motorola's anticompetitive threat. [...] Those who are too weak to resist the threat are also the least likely to challenge the anticompetitive conduct. The result would be a perverse 'under-supply of challenges to patent hold ups.'"

We may see more Noerr-Pennington arguments in FRAND disputes. And we may also see more and more private antitrust litigation involving FRAND-pledged SEPs given the weak and very limited action taken so far by U.S. antitrust regulators.

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German court dismisses Nokia's SMS sorting patent cases against HTC and ViewSonic

I have a quick update on Nokia's patent litigations against HTC and ViewSonic. As I predicted in my May 29 post on the Nokia v. HTC and Nokia v. ViewSonic joint trial held by the Munich I Regional Court after separate first hearings (ViewSonic, HTC), the court's 21st Civil Chamber (Presiding Judge: Andreas Mueller, or "Mueller" in German) dismissed these lawsuits, finding no infringement of the defendants' Android-based devices of EP0982959 on a "mobile telephone user interface for short messages". For the issues in the case, let me just refer you to my previous posts.

Nokia issued the following statement:

"Nokia respectfully disagrees with the decision of the court and we will consider our options. However, this is only one case among more than 50 patents asserted against HTC and more than 20 against Viewsonic. HTC has already been found to infringe another Nokia patent and an injunction is already in effect in Germany as a result of that decision. HTC and Viewsonic need to end their unauthorized use of Nokia's proprietary innovations."

This patent isn't standard-essential. HTC and ViewSonic are licensed to Nokia's SEPs, but non-SEP issues between these parties have yet to be resolved. And HTC is proving to be a very tough target. The Taiwanese device maker is defending itself exceptionally well.

I'd just like to add that Judge Mueller's panel is a particularly difficult one to persuade of infringement claims. The dispute between Apple and HTC was settled before Judge Mueller ruled on a couple of Apple v. HTC cases, but based on his extremely narrow claim constructions, Apple wouldn't have won much against HTC in his court. He also denied preliminary injunctions against Samsung (requested by Apple) and Motorola Mobility (requested by Microsoft) -- preliminary injunctions based on patents are very hard to win in Germany.

Apparently recognizing that its first wave of German lawsuits has not given it decisive leverage over HTC, Nokia has stepped up the pressure through an additional U.S. federal lawsuit and a second ITC complaint. A preliminary ruling on Nokia's first ITC complaint against HTC is scheduled to come down in late September. Also, some more Nokia-HTC patent rulings will soon be announced in Mannheim, Germany (and it's not too likely that Nokia is going to win those cases). HTC's three German countersuits (including one by its S3 Graphics subsidiary) will also be adjudicated soon.

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Thursday, July 25, 2013

Google's reply brief completes briefing in Oracle's Android-Java copyright appeal

Today the public version of the fourth and final brief in the Oracle v. Google Android/Java copyright appeal became available: Google's reply brief concerning the smaller items with respect to which the district court had found it liable for infringement. These items are so insignificant that Oracle told the district court last year that it wasn't interested in collecting even one cent of damages over those items unless its appeal with respect to the declaring code of 37 Java API packages succeeds. Therefore, Google's reply brief is interesting from a procedural/tactical perspective but not so much in substantive or economic terms.

Let me show you the brief anyway (this post continues below the document):

13-07-22 Google Reply Brief in Oracle's Copyright Appeal

The most important aspect of this brief is not what it says but the fact that it was filed: briefing is now complete and the United States Court of Appeals for the Federal Circuit will soon schedule a hearing. The Federal Circuit already has three very interesting smartphone IP cases scheduled for August (Microsoft-Google cross appeal of ITC ruling on Microsoft's complaint against Motorola, Apple's appeal of Judge Koh's denial of a permanent injunction against Samsung) and September (Apple-Motorola cross-appeal of Judge Posner's ruling). These other cases are patent cases while Oracle v. Google is exclusively a copyright infringement (and copyrightability) case at this stage. I guess the Oracle v. Google hearing will take place in the fourth quarter.

Regardless of whether there's much of an economic threat to Google from the district court's findings of infringement of the nine-line rangeCheck code and a bunch of decompiled test files, Google presumably appealed for the following tactical reasons:

  • As a cross-appellant it's in a better position to cause delay at various stages of the process.

  • Smaller issues that the appeals court needs to address take attention and hearing time that Oracle would probably like to see spent on the tuly important matters.

  • Google got the last word before the hearing. That last word had to be focused on the minor items Google appealed, but filing the last brief is a potential opportunity to address general questions that have a bearing on the more important issues in the case. In that regard, the following passage from Google's reply brief is rather telling:

    "Instead of providing compelling answers to those questions, Oracle's cross- appeal brief reprises some of the most troubling aspects of Oracle's main appeal from the adverse judgment on its SSO [structure, sequence and organization] claim. As in its main appeal, Oracle brushes aside the controlling Ninth Circuit case law [...]"

I have the greatest respect for how Google defends itself against infringement allegations not only in this case but also in many others. I'm still not sure it was the right choice for Google to appeal the unfavorable parts of the district court's ruling. The eight decompiled Java files, with respect to whith District Judge Alsup overruled the jury, are clearly copyrightable and not de minimis, and copying was admitted. Relatively speaking, the nine-line rangeCheck function is a better case for a challenge, but this is so insignificant that, if I were in Google's position, I wouldn't want to bother what is probably the busiest appeals court in the entire United States with something like that.

By taking an extreme on those eight decompiled Java files, Google risks appearing as just the anti-IP organization (at least anti-third-party-IP) that it is according to Oracle's reply brief. In my commentary on Oracle's reply brief I said that Google "would have [had] to be reasonably specific as to what kinds, elements and aspects of software fall within the scope of copyrightability if the appeals court affirmed the district court's ruling", but it failed to clarify this, while it's much clearer where Oracle draws the line between copyrightable and non-copyrightable program code. By trying to deprive even those eight Java source files of protection Google really positions itself as a company promoting no-holds-barred IP infringement, and I'm not sure this was the right choice. It certainly would have been poor judgment in a political debate, where you build a majority by taking centrist positions. An appeals court is different from, say, Congress, but policy considerations will play a major role in the adjudication of this appeal.

A former U.S. copyright chief, Ralph Oman, said in his amicus brief that the district court's ruling "eviscerates" copyright protection for software. If Google succeeded in the reversal of any item with respect to which the district court had sided with Oracle, then the verb "to eviscerate" would have to be replaced with "to abolish". At the hearing Google may have to explain to the Federal Circuit how its positions can be supported without abolishing software copyright.

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Wednesday, July 24, 2013

FTC finalizes consent decree in Google FRAND antitrust case, makes 'technical modifications'

Today the Federal Trade Commission (FTC) announced the finalization of the consent order settling the Google (Motorola Mobility) antitrust case with respect to FRAND-pledged standard-essential patents (SEPs). As the announcement says, the U.S. antitrust agency made merely "technical modifications" in response to public comments received after publication of the original version published in early January 2013 (initial commentary on announcement, explanation of deal structure, comparison with FTC-Bosch settlement).

The FTC has done Google a favor by no longer alleging anticompetitive conduct:

"The Commission has decided to remove the count from the complaint alleging that Google has engaged in unfair or deceptive acts or practices. Removing this count does not indicate a Commission view on the application of its unfair acts or practices authority in other matters alleging harm to competition or the competitive process."

The fact that the original version of the order said so nevertheless means something.

It's a done deal now, so I'm going to focus on what this means for pending and future FRAND SEP litigation involving Google (Motorola Mobility) or other SEP holders.

Simultaneously with the final order, the FTC published a letter it sent to public commenters explaining the modifications made and the rationale behind them. Generally, the text of the order itself is going to have more weight than additional explanations provided by the FTC. In May, Google told the United States Court of Appeals for the Federal Circuit that "[t]he FTC consent decree does not prevent Motorola from seeking an injunction [against Apple]" (which the FTC letter published today actually confirms) and said that "[t]o the extent the Commission's statement [the one at the time of the original announcement] suggests otherwise, it was incorrect and cannot alter the terms of the actual consent decree". And the FTC confirms this in footnote 11, saying that "[a]n Order is interpreted by its terms alone, and those terms are not modified by ancillary documents or statements made by the Commission or Commission staff". Nevertheless, the FTC's open letter to public commenters will be leveraged by parties to disputes as they seek to persuade courts of law of particular interpretations of the final FTC-Google agreement and debate SEP-related policies in different contexts.

In its letter, the FTC stresses the case-speficc nature of the settlement ("The Order was negotiated in response to the specific facts of this case."). In March a relatively litigious SEP holder, InterDigital, already said that this settlement "is not a basis to adjudicate subsequent cases". But this is not a binary question of 0% or 100%. The question is how much weight the FTC-Google deal will have relative to case law and other persuasive authority. It's going to "compete" for weight with rulings by federal courts, decisions by other governmental agencies (DoJ, ITC), policy papers, other write-ups, and even with decisions by courts and regulators in other jurisdictions such as the European Union. I don't think anyone can predict how influential the FTC-Google deal as a whole will be in, say, a year from now. It's not even clear how much weight a particular court will give it tomorrow.

A key concern about the FTC-Google deal related to the "defensive use" exception, and the mutual pursuit of ITC import bans over FRAND-pledged SEPs by Ericsson and Samsung shows that this is not in the interest of consumers. The FTC defends its decision not to fix this problem, the letter says that "its inclusion in the Order does not indicate a particular view about defensive-use exceptions generally".

Footnote 10 says the following about implications for patent assertions against Android device makers:

"Contrary to suggestions by commenters, the provision is not triggered by all injunction actions against an Android OEM based on alleged infringement of an SEP. Rather, the provision only allows Google to seek an injunction in response to an action for infringement against an Android OEM if the SEP holder seeks an injunction and alleges that software or another product supplied by Google to the OEM infringes the relevant SEPs."

I would agree that the above should be the result of a reasonable interpretation of that clause. The problem I see here is the legal uncertainty this creates, and that footnote (even if given a maximum of weight) won't prevent Google or others from claiming that the requirements for "defensive use" are met. Just yesterday I reported (again) on a claim of standard-essentiality that HTC brought to dodge a Nokia patent. HTC just made the claim (which, by the way, involved the Google Cloud Messaging protocol) and triggered an arbitration proceeding, but ultimately it didn't even want the arbitration proceeding to go forward. Also, the question of whether a particular component of a product found or alleged to infringe implements a given patent comes up all the time in connection with patent exhaustion defenses, and plaintiffs and defendants alike sometimes take positions on exhaustion that are less than reasonable. The FTC's letter makes reasonable interpretations somewhat more likely -- but that's the extent of it.

My favorite sentence in the FTC statement is this one (from footnote 13):

"It is important to highlight that the Order, including the arbitration provision, does not negate or alter traditional burdens of proof, or deprive implementers of their rights to seek judicial review, challenge infringement, or raise defenses such as validity, exhaustion, and essentiality."

These rights of implementers/defendants are also key to the ongoing EU antitrust investigations of Motorola Mobility's use of FRAND-pledged SEPs against Apple and Microsoft.

The FTC also supports the principle that a party must have the right to appeal a rate-setting decision without the threat of an injunction in order to "ensure the fairness of the FRAND Determination Action".

There are definitely some things that I like a lot about the FTC's letter. I just disagree on where to "strike[] a balance between Google's rights and interests as a patent holder, and the rights and interests of implementers". That balance must be struck for sure. I just don't think that, in order to strike that balance, one must allow SEP-based injunctions in situations in which Google can simply sue for damages and post-judgment royalties. In his Apple v. Motorola ruling, Judge Posner addressed this question, and I agree with him.

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Tuesday, July 23, 2013

Apple opposes Samsung's motion for a new rubber-banding patent trial (or related appeal)

Two weeks ago Samsung filed a motion for a new trial concerning its liability for infringement of the '381 rubber-banding patent or, in the alternative, a partial final judgment with respect to that patent in order to appeal the decision right away to the Federal Circuit. Either way, the limited damages retrial scheduled for November would have to be postponed, which is what Samsung is also pursuing through another motion it brought earlier this month, alleging a failure by Apple to comply with court orders, which Apple calls an attempt to "delay and derail" the limited damages retrial.

Yesterday Apple responded to Samsung's motion relating to the rubber-banding patent, which Samsung argued was narrowed in scope due to Apple's statements during the reexamination process, suggesting a different outcome of the infringement analysis. Here's the public redacted version of Apple's opposition brief (this post continues below the document):

13-07-22 Apple's Opposition to New Rubber-banding Patent Trial in Samsung Case

I have also uploaded to Scribd the declaration attached to Apple's brief.

Apple has multiple attack vectors in place against Samsung's motion. Some are procedural (among other things, Apple argues that Samsung's motion is "time barred") while others are substantive:

  • According to Apple, Samsung's motion can be denied simply on the basis that "[t]he evidence to which Samsung points--Apple's statements during reexamination of the '381 patent--did not exist until May 2013, some nine months after trial", while new trials based on "newly discovered evidence" can be grnated only if they "have been in exist[e]nce at the time of trial" (July/August 2012).

  • Another requirement is that such newly-discovered evidence must not have been "discoverable through the exercise of reasonable diligence", but Apple says it has taken consistent positions with respect to the relevant piece of prior art ("Lira") throughout the case. So Apple believes Samsung can't claim now that this is new in any way.

  • Apple also says Samsung's non-infringement arguments are wrong. This is a context in which the aforementioned declaration adds a lot of detail. However, Apple makes a distinction between implementations of rubber-banding that "benefit the most from that invention" (by avoiding a situation in which the end user instinctively believes the touch screen is not responsive) and others. I agree, but Samsung may have more of a case (apart from procedural arguments) with respect to some aspects of the implementations that provide lesser benefits. And in a very strict sense that could also have implications for the determination of damages.

  • Apple also denies that the statements it made during reexamination can be characterized the way Samsung characterized them. In my post on Samsung's motion I had also expressed some doubts in this regard.

Apple says "[t]his case is within striking distance of a true final judgment" and wants to "proceed with the trial".

While Apple has multiple lines of defense and reasonably proposes to go forward with the limited retrial and then take everything to the appeals court, there's certainly a risk here for Apple that Judge Koh might seize this opportunity to delay the damages retrial, hoping that it may never have to happen if the parties settle before the rubber-banding issues is adjudged by the appeals court. I doubt that Judge Koh would hold a new rubber-banding liability trial, but it wouldn't require much effort on the court's part to issue a final judgment on that patent. But Apple's opposition brief argues that such a partial ruling would not be appealable, at least not under the case law Samsung cites to. (And I generally don't believe that a mere delay brings these two parties closer to a settlement -- they need real guidance).

I still think Samsung's motion was absolutely legit, but it will be hard for Samsung to overcome Apple's various lines of defense against it.

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