Yesterday Microsoft responded to the court's decision to allow a motion to bar Google's Motorola Mobility from pursuing a German H.264 (video codec) royalty-collection lawsuit. The filing sheds some more light on the state of affairs in the parties' cross-jurisdictional dispute over Motorola's H.264 standard-essential patents.
Last week I found out that a German appeals court, the Karlsruhe Higher Regional Court, had stayed, as requested by both parties, the appellate proceedings relating to four May 2012 infringement rulings (two H.264 patents asserted against two sets of defendants) by the Mannheim Regional Court. That stay made a lot of sense because both parties believe (for disparate reasons) that Microsoft has, or is at least entitled to, a worldwide license to Motorola's SEPs.
It now turns out that Google stipulated to stay of those proceedings only after the August 13 pretrial conference in the FRAND contract case in Seattle. A partial hearing transcript indicates that Judge Robart didn't want to go into details on the German situation but made clear that he expected full compliance with his rulings.
The appellate proceedings on the merits are not the only ones to have been stayed at that juncture. Yesterday's filing shows that Google also stipulated to stay of its recently-filed royalty collection lawsuit. Motorola filed its complaint on April 26, 2013, seeking roughly $2.6 million in royalties (plus interest) based on an "agreement", which has, however, not been concluded in Microsoft's opinion. On July 31, 2013, the complaint was served on Microsoft (international service takes time, and can even take much longer than that). Then Microsoft informed Judge Robart about a week later, and another week later the pretrial conference took place. As per an order dated August 22, 2013, Judge Dr. Kircher (Mannheim Regional Court) stayed that case.
In addition to appellate proceedings on the merits and the royalty collection lawsuit, there's a third track: Google recently demanded an accounting from Microsoft, and the obvious purpose of such accounting is to prepare a damages lawsuit. So far I'm not aware of a damages lawsuit actually having been brought. Royalty collection and damages are closely related here because Google would like to base a damages claim on the alleged (but disputed) "agreement". It appears that Google's plan was to establish the existence of that agreement in the royalties collection lawsuit before a decision on its future damages lawsuit (maybe even before filing the latter). Quite tellingly, Google's lead counsel at the August 13 pretrial conference, Quinn Emanuel's Kathleen Sullivan, referred to the April 2013 royalty collection lawsuit as an action to obtain "past damages" -- another indication of the agenda and of how Google's gamesmanship in Germany confuses even its own lawyers.
Google's damages claim is certainly going to be far greater than the $2.6 million royalty collection claim. It's going to seek a disgorgement of infringer's profits, not just royalties. I don't think it would actually be awarded by a German court nearly as much as it hopes for, but it definitely wants the specter of an excessive damages award to hang over any settlement negotiations.
Microsoft would like to simply and streamline the process. It has consistently argued that the SEP-related dispute should be resolved in the United States. And the recent jury verdict, finding Motorola to have breached its duty of good faith and fair dealing in the FRAND context, strengthens Microsoft's position. This is what Microsoft proposes at the end of yesterday's filing:
"Motorola should simply accept the [F]RAND royalties that Microsoft has tendered and drop its German suits. However, so long as Motorola agrees to leave the stays in place and not initiate any other action against Microsoft related to Motorola's SEPs, absent seeking leave from this Court, Microsoft believes that action from this Court is not necessary."
Right now, the German cases could be unstayed by any party's unilateral action. I guess Google wouldn't want to make the exercise of its right to unstay the German cases dependent on permission by Judge Robart, at least not with respect to damages, but at the same time it will want to be (or at least appear) somewhat cooperative. It has until Monday (September 23) to file its reply.
I won't blame Google if it tries, as I guess it will, to convince Judge Robart that damages for past infringement in Germany are a separate issue from the Seattle FRAND contract case, regardless of whether one agrees or disagrees. But Microsoft's filing discusses, among other things, two arguments Google has made in an appellate brief in Germany that I consider disingenuous:
Google told the Karlsruhe-based court that Judge Robart's valuation of the H.264 SEPs-in-suit doesn't apply to the German situation because of differences relating to means-plus-function claims. It has the right to fight for its right to bring a damages lawsuit in Germany. But apparently it never told Judge Robart (while he was working on his rate-setting opinion) that he needed to consider such jurisdictional differences. It was clear that Judge Robart was going to set a worldwide rate. Anything relevant to this valuation, especially when it relates to a rather large market, should have been raised. There was a full bench trial and extensive briefing before the rate-setting opinion.
Despite Microsoft's firm commitment to take a worldwide license on court-ordered terms, Motorola argued in Germany that Microsoft is not a "willing licensee" by the European Commission's standard, basically saying that it would be a willing licensee only if it accepted a rate determination by a German court. I don't think the European Commission or the Karlsruhe appeals court would agree -- but I am disappointed that Google even takes such an extreme position what constitutes willingness to license.
This is another example of what Apple's lead counsel in the Posner appeal said at last week's Federal Circuit hearing about the "whole notion of 'unwilling licensee'" being a "mischievous notion".
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