Google's Motorola Mobility nearly had to fight a two-front FRAND war in appeals courts in the U.S. and Germany on this week's Wednesday (September 11, 2013). The United States Court of Appeals for the Federal Circuit scheduled the "Posner appeal" (Apple v. Motorola, Northern District of Illinois) for that day, and over in Germany, the Oberlandesgericht Karlsruhe (Karlsruhe Higher Regional Court) had scheduled the appellate hearings on two of four General Instrument Corporation [originally a Motorola subsidiary, now a Google subsidiary] v. Microsoft decisions by the Mannheim Regional Court relating to H.264 standard-essential patents for that day. Today I checked with the Karlsruhe-based appeals court and was told that the court had already ordered on August 21 to stay those four H.264-related appeals further to a stipulation by the parties. Either party can ask the court at any time to resume the appellate proceedings, which for now are on hold.
This simplifies things for Google, and also for me. This way I will be able to comment immediately on the "Posner appeal" hearing when the Federal Circuit publishes the official recording on its website. If I had had to go to Karlsruhe, I would probably have been on a train at that time, delaying my analysis.
I have obtained a copy of the orders to stay the H.264 appeals, and they don't say anything about the reasons for the stay. But there's no shortage of possible reasons.
This is a typical agree-to-disagree situation. For mutually-exclusive reasons, both parties believe that a license agreement covering the German parts of those H.264 SEPs exists:
Microsoft's position is that it's entitled to a worldwide license at the royalty rate determined by Judge James Robart. It has even offered Motorola to pay $7 million in license fees, but the Google subsidiary refused to take the money. After last week's Seattle jury verdict, the U.S. FRAND contract case is headed for a final judgment and a subsequent appeal by Google. If Google loses that appeal, then there won't be any doubt anymore about the worldwide scope of Microsoft's license. But this will take time.
Google's Motorola claims, and Microsoft disputes, that the parties entered into a valid and enforceable license agreement specific to the German patents-in-suit. For procedural details on the German situation, please follow the link I provided in the previous sentence. The short version is that Microsoft had to make an offer to take a license to the German patents-in-suit due to the Orange-Book-Standard procedure in Germany, which Motorola rejected, but many months later suddenly claimed to have "accepted". Microsoft disagrees with this theory and says that Motorola's acceptance was, if anything, a new offer of a different kind of deal.
Based on its theory that there is a German license agreement in place, Google's Motorola recently brought a royalty collection lawsuit in Germany and appears to be preparing a damages lawsuit as well.
If the appellate hearings had not been postponed indefinitely further to the parties' stipulation to stay these four cases, the first thing the Karlsruhe-based court would have had to sort out is whether or not there is a license agreement in place. Only if the court had disagreed with both parties' license theories, the question of liability (which in these cases came down to just the question of infringement because Microsoft was anticompetitively obligated to drop its invalidity defenses) would have been reached. If in this scenario -- in which last week's jury verdict would also have come up -- at least one of the Mannheim court's liability findings had been affirmed, then the court would have had to address remedies: Motorola's entitlement to damages for past infringement and to injunctive relief. The question of injunctive relief, if reached, would have inevitably raised two problems with respect to EU-level proceedings:
The European Commission is investigating Motorola Mobility's SEP assertions in Europe against Microsoft (as well as those against Apple).
Another German court referred various Orange-Book-Standard-related questions to Europe's highest court.
The national courts of all EU member states have to avoid inconsistencies between their decisions and EU-level regulatory and court decisions. If necessary, they have to stay the local proceedings pending resolution of relevant EU-level processes. That would have happened here, if this question ha even been reached.
As you can see, there's quite some procedural complexity here that results from parallel litigation in the U.S. and Germany (Motorola filed its German complaints approximately eight months after Microsoft's FRAND contract action in Seattle) as well as from ongoing and relevant EU-level processes.
At first sight it may appear inconsistent for Motorola to bring new royalty collection and past-infringement damages lawsuits in Germany while stipulating to a stay of four appellate proceedings concerning the merits of its H.264 infringement claims. But Motorola believes that there is a license agreement in play under which it can collect royalties and past-"infringement" damages regardless of whether its infringement theories were meritorious in the first place. So it may not be inconsistent, but its conduct isn't necessarily above board from an antitrust point of view: the European Commission considers it very important that implementers of standards can dispute infringement, validity and essentiality, also in connection with rate-setting decisions.
Despite the four Karlsruhe orders to stay, Microsoft and Google's Motorola will meet in a German appeals court this week: on Thursday, the Munich Higher Regional Court will hear Microsoft's appeal of the Munich I Regional Court's dismissal of a lawsuit against Motorola Mobility over EP0669021 on "multi-lingual computer programs". Microsoft won three German injunctions against Motorola Mobility last year and has the highest hit rate so far of any litigant in the smartphone space, but it has also brought some assertions that didn't initially succeed -- and the "multi-lingual computer programs" case is one of them, though the case appeared to be a close call at trial. The Bundespatentgericht (Federal Patent Court) will hold a nullity (invalidation) hearing on this patent on October 17. The fact that the appeals court will hold its hearing on the infringement case instead of firstly awaiting the nullity ruling (since the parties to an infringement dispute typically stipulate to a stay of the infringement proceedings after a nullity declaration) suggests that the patent is not unlikely to be upheld. If this assumption is correct, then losing is not an option for Google at the Thursday appellate hearing on infringement.
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