Friday, November 8, 2013

German court stays Google-Apple FRAND rate-setting case, invites EU Commission to participate

More than four months after a trial at which the Mannheim Regional Court was not quite inclined to endorse Google's (Motorola Mobility's) 2.25% standard-essential patent (SEP) royalty demand from Apple, Judge Andreas Voss ("Voß" in German), the judge presiding over the panel hearing this case, announced an order to stay the case pending the European Commission's ongoing antitrust investigation of Motorola's use of SEPs against Apple. Six months ago the EU's top antitrust regulator issued a Statement of Objections (SO), a preliminary ruling, against Motorola's conduct. A hearing was recently held in Brussels.

The court also invited the European Commission to participate in this German FRAND terms case and referred several questions to the EU. The questions were not publicly announced because they involve a confidential contractual relationship between the parties. The court did say that the questions relate to what kinds of terms constitute a FRAND agreement. At the June trial, Apple raised objections to Motorola's condition, imposed upon Apple at the threat of injunctive relief, that Apple refrain from disputing the infringement/essentiality and challenging the validity of the licensed patents. In its announcement of the SO against Motorola, the European Commission had taken the preliminary view that such terms are anticompetitive.

In my experience it's very unlikely that the Commission would provide input to the court with respect to royalty rates. Competition enforcers try hard to avoid making or reviewing patent portfolio valuation of any kind.

Today's referral is based in EU law. The national courts of the EU Member States have to prevent inconsistencies between their application of EU competition law and that of the relevant EU institutions. For that reason, another German court, the Düsseldorf Regional Court, stayed a Huawei v. ZTE SEP infringement case in March in order to seek guidance from the Court of Justice of the EU.

Google acquired Motorola Mobility for $12.5 billion in hopes of gaining leverage from its patents over Apple, Microsoft and other patent holders (except for non-practicing entities, which can't be countersued for infringement). It currently has zero enforceable patent injunctions in place against Apple and Microsoft, and isn't likely to win any in the near term. Its efforts to extract multi-billion-dollar royalties have also been unsuccessful so far. A U.S. court determined in April that the proper royalty rate for Motorola's H.264 (video codec) and IEEE 802.11 (WiFi) patents to be paid by Microsoft was less than $2 million per year. Also in the U.S., a FRAND rate-setting case initiated by Apple is on appeal. Apple argues that Motorola demanded more than 12 times what it was charging other mobile device makers.

If you'd like to be updated on the smartphone patent disputes and other intellectual property matters I cover, please subscribe to my RSS feed (in the right-hand column) and/or follow me on Twitter @FOSSpatents and Google+.

Share with other professionals via LinkedIn: