Wednesday, October 30, 2013

Support, competent pushback for Goodlatte patent reform proposal at Congressional hearing

Yesterday I tweeted and retweeted numerous times during the three-hour hearing on the proposed "Innovation Act" (H.R. 3309: Improving the Patent System to Promote American Innovation and Competitiveness) held by the Judiciary Committee of the House of Representatives. Committee Chairman Bob Goodlatte (R-Va.) opened the hearing; last week he led a bipartisan group of Congressmen who jointly made this legislative proposal.

It was an interesting discussion with witnesses from EMC, Yahoo, a former head of the USPTO who is now a partner at IBM's primary law firm (Cravath), and a former general counsel of pharmaceutical giant Eli Lilly.

To me it became clear pretty quickly that the movement pushing for far-reaching reform faces a steep challenge. There are items on which it won't be too hard to build consensus, but apart from some low-hanging fruit, there are also some more ambitious plans that would affect patent litigation even more fundamentally but have drawn a lot of blowback from Members of Congress as well as industry players and intellectual property professionals.

Last month I reported on a letter that more than 100 innovators wrote to express their opposition to an expansion of the Covered Business Method Patents review program (often just referred to as the "CBM program"), and based on how yesterday's hearing went, this is the part of the Goodlatte proposal that is least likely to come to fruition anytime soon. The CBM part of the Goodlatte proposal may be in for an even rougher ride in the Senate, but it's hard to see how it could receive majority support in the House as a first step, so the Senate may not even have to look at it.

Two of the witnesses (from EMC and Yahoo) favor the Goodlatte proposal, and they did a great job advocating reform. EMC is the more credible innovator of the two companies. Web companies like Yahoo typically don't develop hardcore technology. The Web business is more about doing the right thing at the right time and building network effects and brand recognition. EMC is a hardcore innovator, but there aren't many companies like EMC who would support weakening patent enforcement.

Former USPTO chief David Kappos was undoubtedly the most competent witness and explained his views very well, and it's clear that his insights bear considerable weight with Members of Congress (even some of those advocating major reform).

Mr. Kappos also highlighted something that many of the participants in the hearing and the public debate may not have understood yet. The "customer-suit exception" in its drafted form may not be too helpful anyway because lawsuits between patent holders and manufacturers typically raise different issues from lawsuits against end users. (Apart from the fact that Mr. Kappos is right on this one, I generally think that technology makers must protect their customers, though there are probably some lawsuits targeting end users, such as patent royalty demands or infringement actions over WiFi or the use of scanners, in connection with which it's difficult to identify a particular vendor who should step in.)

Many Members of Congress asked questions. On balance, the ones cautioning against overcorrection of certain issues made a more competent impression. One of the politicians promoting major reform -- out of politeness I won't say which one -- asked questions that reflected his own confusion and lack of understanding of how patent law works. By contrast, IP-specialized politicians such as Representatives Conyers and Watt demonstrated their knowledge. Interestingly, the more time politicians spend on IP matters, the less they are in panic mode concerning patent trolls and other pretexts.

There was relatively little discussion of another important topic that I consider important and on which it may not be too hard to build a consensus: transparency. Congressman Deutch focused on it, and I hope he'll continue to push for more transparency in patent ownership.

A really good article on the U.S. patent reform debate was published ahead of the hearing, and one of the experts quoted in it says something that's absolutely correct: the reform proposals on the table don't really have much to do with trolls per se.

The one proposal that I think is most likely to have an impact on trolls is, however, also most likely to get broadbased support: fee-shifting. This appears to be a consensus item. There will never be a 100% consensus on a question like this, but it's apparently as close to 100% as it realistically gets in politics. The only Member of Congress who strongly spoke out against fee-shifting yesterday was someone from Texas whose electoral district includes parts of the Eastern District of Texas. He's not going to be able to stop fee-shifting from happening. And those who argue that the Supreme Court is in the process of dealing with this also won't be able to discourage lawmakers from doing what their job is: to pass good policy into law. In all fields, including patents, the Supreme Court has repeatedly indicated that certain decisions must be made by the legislature, not by judges.

I'll continue to follow the patent reform process. I guess the Goodlatte proposal in its complete, current form is not going to become law in the near term. Congress will ultimately agree on a common denominator, and it could end up being the lowest common denominator, which is basically fee-shifting and (hopefully) some transparency initiative, but not an expanded CBM program. Staged discovery could also work, depending on whether it's really focused on preventing abuse or hijacked by those who just seek to slow down and weaken IP enforcement.

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Nokia wins patent case against HTC in the UK over patent asserted in 5 countries on 3 continents

I've been saying for a long time that HTC will end up paying royalties to Nokia for a license to some of Nokia's non-standard-essential patents (it already has a SEP license). It's been defending itself vigorously and effectively so far, but its own assertions against Nokia are not going to give it leverage. It's only a matter of time before a tipping point is reached, and Nokia made major headway today in the most difficult court in the world for plaintiffs, the England and Wales High Court.

Justice Arnold ruled today that Nokia's EP0998024 on a "modular structure for a transmitter and a mobile station", a pretty powerful mobile phone hardware patent, is valid (HTC tried to shoot it down in the UK in hopes of influencing decisions in other jurisdictions) and infringed by various HTC products including its current flagship, the HTC One, which incorporate certain Qualcomm and Broadcom chips. Nokia is suing HTC over this patent not only in the UK, where it can seek an injunction now after today's win on liability, but also in Germany, where the Düsseldorf Regional Court will hold a trial soon, Italy, and Japan. I didn't even know Nokia was also suing HTC in Japan -- so far I was aware of litigation in the US, UK, Germany, and Italy. Today Nokia also mentioned yet another jurisdiction in which it's suing HTC -- the Netherlands (it's not asserting today's winning patent there, at least not yet). All of this means a lot of pressure, and I say it again, HTC will inevitably end up paying. As will Samsung, with which Nokia has been negotiating for some time and which it may have to sue at some point.

This is the public ruling (this post continues below the document):

13-10-30 HTC v Nokia Public UK Judgment EP0998024 by Florian Mueller

Here's the summary of the ruling (click on the image to enlarge or read the text below the image):

"189. For the reasons given above, I conclude that:

i) claim 1 of the Patent is novel over Ikatura;

ii) claim 1 is not obvious over either Ikatura or Tan;

iii) each of the representatives HTC devices falls within claim 1;

iv) HTC has not established its defence of licence."

These are the representative devices and the corresponding chips accused in the UK action:

DevicesChips
One SV (non-LTE)Qualcomm WTR1605
One, One SV (LTE)Qualcomm WTR1605L
Wildfire SBroadcom BCM4329
One SV (LTE), One SV (non-LTE)Broadcom BCM4334

Nokia issued the following statement:

"Nokia is pleased that the UK High Court has today confirmed the validity of Nokia's patent EP 0 998 024 and ruled that a number of HTC products, including the HTC One, infringe this patent.

Today's judgment is a significant development in our dispute with HTC. Nokia will now seek an injunction against the import and sale of infringing HTC products in the UK as well as financial compensation. Local counterparts of this patent are already in suit against HTC in Germany, Italy, Japan and the US.

This is the third court this year to find that HTC infringes Nokia patents, bringing the number of patents found infringed to four. In September, the US International Trade Commission gave an initial determination of infringement of two Nokia patents and, in March, the Mannheim court ordered HTC to cease infringing a Nokia power saving patent.

Nokia began its actions against HTC in 2012, with the aim of ending HTC's unauthorised use of Nokia's proprietary innovations. Nokia has now asserted more than 50 patents against HTC in France, Germany, Italy, Japan, the Netherlands, UK and US."

The ITC ruling is preliminary. HTC has petitioned for a Commission review of the initial determination, and it's working together with Qualcomm to modify its products so as to avoid a possible ban.

Next week Nokia may very well win a second German injunction against HTC. I will attend the announcement of that ruling.

Yesterday the Mannheim Regional Court held a trial on a Nokia v. HTC lawsuit over RFID. I did not attend that one, but will try to find out about the ruling when it comes down. I recently also missed a couple of Munich Nokia v. HTC trials (during my week off), but won't miss the rulings.

Many of Nokia's patent assertions against HTC involve Google's Android mobile operating system. A Nokia-HTC license agreement will relate to Android's use of various Nokia patents as well. 22 royalty-bearing patent license deals relating to Android are already known, and a Nokia-HTC settlement will be added to that list sooner or later.

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Tuesday, October 29, 2013

Google tries to keep the door open to 4G patent attacks on Apple products with Qualcomm chips

Several new documents were filed yesterday in the Apple v. Motorola Mobility anti-suit action in the Southern District of California, in which Apple is asking the court to bar the wholly-owned Google subsidiary from asserting cellular standard-essential patents (SEPs) against Apple products incorporating Qualcomm chips (except in the same district or in Germany, where a license agreement is in place based on a royalty rate to be determined by a court). Apple argues that Motorola is not allowed to bring such assertions under a license agreement it has in place with Qualcomm, as Qualcomm's customers are protected under the deal. A summary judgment motion filed by Apple on Friday indicates that Google's Motorola gives the word "customer" a meaning Apple finds inconsistent with dictionary definitions.

In my post on the Friday motion (which I just linked to) I discussed the potential impact of this Southern California case, which is scheduled to go to trial next spring. The Friday motion relates to Motorola's "termination" of the Qualcomm agreement with respect to Apple as a third-party beneficiary. According to a document of which Apple provided a public redacted version yesterday, "Qualcomm has repeatedly and unequivocally advised Motorola that Motorola's efforts to terminate are improper and ineffective".

Yesterday Motorola also brought a couple of (partial) summary judgment motions and a motion to exclude an expert. One of the PSJ motions is really interesting because it reveals that Google wants to at least preserve its right to assert Motorola's 4G (Long-Term Evolution, LTE) patents against Apple products incorporating Qualcomm baseband chips. It's heavily-redacted, but to me it's beyond reasonable doubt that this is what the motion is about. Here's the document, and further below I'll explain why this is about 4G/LTE:

13-10-28 Motorola Mobility Motion for Partial Summary Judgment Against Apple Re. Qualcomm Chips by Florian Mueller

The official title of the motion is "motion for partial summary judgment regarding Motorola's patents as applied to certain technology". Theoretically, this could be a lot of things. In practical terms, there's not a lot of possibilities. This is about Qualcomm baseband chips. We're talking about cellular communications technology.

The motion argues that "even if Apple were to prevail in establishing rights [under the Qualcomm-Motorola agreement], and even if the Court were to decide to issue a permanent injunction, Motorola moves the Court for partial summary judgment that the scope of any injunction could not encompass a prohibition against Motorola's future assertion of its patents as they apply to [REDACTED] against Apple's products due to their inclusion of Qualcomm components". So this is about excluding a certain technology from the scope of an injunction.

The redacted version of the motion indicates that the "certain technology" has a very short name. There are a couple of instances in which you can find the phrase "Motorola's patents as they apply", followed by a rather narrow black bar. Grammatically, it's clear that the redaction includes the preposition "to". Now, if there's a narrow bar and three of the characters it hides are T, O and a blank, then there isn't much left for the remainder. Two characters (4G), maybe three (LTE). But no more than that.

I read the whole motion, and while there's no definitive proof of this hypothesis due to redactions, there's nothing in the publicly-accessible part that suggests the assumption is wrong.

Motorola Mobility apparently claims to own about 9% of all patents declared essential to 4G/LTE.

Last year I watched a couple of Huawei-ZTE patent trials in Germany, and the question of whether a license agreement with Qualcomm does or does not extent to 4G/LTE also played a role in at least one of those litigations.

All in all, I had a very strong feeling that this is about 4G/LTE after reading the motion itself, and it became more than just a very strong feeling when I saw a declaration to which Motorola attached its exhibits. There are 14 exhibits. 12 of them relate to the ongoing litigation and the Qualcomm-Motorola deal. Two of them are about 4G/LTE:

7. Attached as Exhibit 5 is a true and correct copy of an article titled "LTE Overview" from 3GPP's website at http://www.3gpp.org/LTE.

8. Attached as Exhibit 6 is a true and correct copy of a press release dated December 1, 2010 from Verizon Wireless' website http://www.verizonwireless.com entitled "Verizon Wireless Launches the World's Largest 4G LTE Wireless Network on December 5".

In my opinion, this answers the question of what Google (Motorola) means by "certain technology". Nice try hiding this fact.

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Ericsson uses Samsung's designaround tactics from Apple case against Samsung at the ITC

The most interesting legal -- to be more specific, procedural -- question in the ITC investigation of Apple's complaint against Samsung was the adjudication of designaround products that Samsung, but not Apple, wanted to be investigated. Now Ericsson is using Samsung's own tactics against Samsung in its own defense against an ITC complaint filed by Samsung in December 2012. And Ericsson may very well succeed. A motion for summary determination was denied, but only because factual issues remained to be discussed at trial. Other than that it doesn't look too bad for Ericsson.

Samsung knew before that what goes around, comes around. And in litigation, things typically come around when the shoe is on the other foot.

Let's start with a quick recap of the Apple-Samsung ITC designaround story. In September 2012 it became discoverable for the first time that designarounds were a controversial issue in the ITC investigation of Apple's mid-2011 complaint against Samsung. The following month, an initial determination (preliminary ruling) by an ITC judge held Samsung to infringe four Apple patents, but cleared all of its designaround products of infringement. In its petition for a Commission review, Apple argued that the Administrative Law Judge lacked a legal basis for ruling on Samsung's designarounds, given that complainants, not respondents, determine the scope of a complaint. On August 9, 2013, the Commission (the six-member decision-making body at the top of the U.S. trade agency) upheld the preliminary ruling with respect to two of the four patents found infringed and also with respect to the judge's clearance of Samsung's designarounds. This month I found out that Apple has appealed the unfavorable parts of the ITC ruling, and when it files its opening brief we'll see whether or not it raises the designarounds issue on appeal.

Yesterday the public redacted version of a September 19, 2013 order by Administrative Law Judge E. James Gildea was filed on the ITC's electronic document system. This is the decision I mentioned further above: he denied an Ericsson motion to determine ahead of trial that Ericsson's designaround products don't infringe, but only because the legal standard for a summary determination (the ITC equivalent of a summary judgment in district court) is that the moving party must prevail even if all disputes facts are viewed in the light most favorable to the opposing party.

In footnote 1, Judge Gildea "notes that there is evidence that Samsung was made aware of the new designs prior to the close of fact discovery and that those new designs were available for inspection in the United States". The ITC would not adjudicate designarounds based merely on prototypes, let alone technical descriptions. There must be evidence of actual importation into the United States, and it looks like Ericsson does have such evidence, but Samsung still argues that "the new designs are not properly part of this [i]nvestigation because Ericsson has not shown that they wil be incorporated into any product for a United States customer". Samsung also disputes that Ericsson delivered any evidence of importation before the close of fact discovery, which Judge Gildea appears unconvinced of -- he's just not 100% convinced of Ericsson's position at this stage, which is why he denied summary judgment.

When the initial determination is handed down, the ruling on designarounds will be a very interesting part to look at.

Here's the public version of the order:

13-09-19 ITC Order Denying Ericsson Motion Re. New Designs by Florian Mueller

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Monday, October 28, 2013

Australian federal judge losing patience with Samsung over Patentgate affair

In California, Samsung has a deadline today for delivering to the court copies of all English-language documents that will be reviewed in camera in connection with the "Patentgate" scandal of improperly-disclosed terms of Apple's highly confidential patent license agreements with Nokia, Ericsson, Sharp, and Philips.

Late on Friday, Apple's lawyers sent a letter to Magistrate Judge Paul S. Grewal "to apprise the Court of four matters that [they had] learned since the hearing on Tuesday that are relevant to the current sanctions proceedings". One of the four items is completely redacted so I have no idea what it relates to. Another one relates to privilege logs. The first one says that even Apple's counsel received only a redacted version of Samsung's main brief filed on Monday in preparation of the Tuesday hearing, apparently relying "on its non-disclosure agreement with Nokia". I guess Apple's counsel will soon get to see the entire pre-hearing brief.

The most interesting item in Apple's letter relates to a hearing held by Justice Annabelle Bennett of the Federal Court of Australia on Thursday, October 24, over the Patentgate matter. The Australian court is concerned because it's currently holding an extensive Samsung v. Apple FRAND trial, and Samsung may have made use of otherwise confidential information in Australia. Apple's lawyers attached an Australian hearing transcript to their letter to the San Jose court (this post continues below the document):

13-10-24 Australian Apple v. Samsung Court Hearing Transcript by Florian Mueller

Apple had already told the U.S. court on Monday that (quoting now from Apple's Friday letter) "Samsung recently acknowledged to the court in Australia that its Australian lawyers violated the confidentiality regime in the Australian court by disclosing an improperly redacted version of a draft Teece Report to four Samsung executives, including Daniel Shim, and to unauthorized Samsung outside counsel". The Thursday hearing was apparently the first hearing on this matter, but a follow-up. The transcript I published covers only the public portion of the hearing in Australia; there is an additional "transcript-in-confidence". The public part is interesting enough all by itself.

At this point the Australian judge appears to be far more determined to order sanctions against Samsung than Judge Grewal in California. She also took Samsung's counsel to task for not having been more forthcoming more quickly. Here are a couple of quotes from the Australian judge:

HER HONOUR: Just one question while you're on your feet. Has the American court been told about the breaches in Australia?

[...]

HER HONOUR: Can I just make one observation? I cannot believe – I really cannot believe that Samsung has not put itself in a position of being able to answer virtually any question – these are obvious questions – whether Samsung has not put itself in a position to be able to answer those questions immediately in Australia. I find that incomprehensible. I would have thought Samsung would have been – Ashurst [Samsung's Australian law firm in this case] would have been bending over backwards to ensure that everything about these confidentiality breaches was known and available and the information be made available to this court, and it would have been offered to the American court.

[...]>

HER HONOUR: I want to know whether the American court is aware that the similar – similar confidential information was breached in Australia in relation to the same person's report.

HER HONOUR: Yes, but I would have thought that work that they're doing with what's happening in overseas – in the overseas situation would be having them look into all aspects of it. And I would have thought, quite frankly, from their perspective that it is an important matter that Australia also had a disclosure of the same area of subject matter, if not the same precise document. And I would be – I mean, I would be surprised if, in their obligations in the United States they haven't made that disclosure.

There's definitely some pressure on Samsung down under and it has to answer some questions now. In the meantime, various stakeholders are working on submissions to the European Commission concerning Samsung's proposed antitrust settlement. Samsung's proposal is insufficient in its own right, and it's even more problematic when considering that Samsung has been improperly provided with confidential licensing information involving multiple companies (three of them European companies) that it could abuse in secret arbitration proceedings.

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Friday, October 25, 2013

Next step in Patentgate proceedings: court review of select material Samsung withheld from Apple

Ahead of the "Patentgate" hearing on Tuesday (on improper disclosures of secret Apple license agreements with Nokia, Ericsson, Sharp, and Philips) I had summarized the parties' positions. Media reports from the hearing were consistent with what I expected everyone to argue based on pre-hearing filings.

After the hearing Magistrate Judge Paul S. Grewal entered an order of an in camera (in chambers) review of select documents containing information Samsung refused to provide to Apple and Nokia on grounds of privilege. Should Judge Grewal find that Samsung tried to hide something and asserted privilege groundlessly, then things will take more time. Otherwise I guess an order on Apple's motion for sanctions will issue shortly because Judge Grewal is interested in resolving this matter (though the party that ends up unhappy with the result may and probably will appeal) ahead of next month's limited damages retrial in the same district (Northern District of California).

Late on Thursday Samsung brought a motion asking for slightly more time to provide the related material to Judge Grewal. According to its motion, "Samsung will have a portion of the 11,500 pages of English language documents delivered to the Court before noon [today], and an additional set delivered before 5:00 p.m." and "will attempt to meet all remaining deadlines in the Order as well". Just as I was writing this post, Judge Grewal ruled on that motion. He granted it in part, adding another requirement to Samsung's proposal: "All remaining English documents shall be produced by October 28, 2013 at 9am."

No matter how many pages will be delivered now, it appears to me that the "Patentgate" affair has already had an irreparable effect: the industry at large no longer trusts that its contracts will be treated in abidance by protective orders. I see profound concern in some places, and unless these proceedings result in sanctions that are viewed as a serious deterrent, industry players will assume that the rules will continue to be breached because there's more to gain than to lose.

At this stage (though it may be too early to tell because who knows what the in camera review will uncover), it's not likely that the court will order sanctions of the deterrent kind. At the conclusion of the Tuesday hearing, Judge Grewal said he was not yet sure that sanctions are warranted. This suggests to me that if he orders any sanctions at all, they will be light.

The challenge for the court here is that a Samsung executive and a Nokia executive have described, in sworn declarations, certain statements by that Samsung executive on how he learned about the Apple-Nokia deal terms and whether he told Nokia the exact terms of the license in ways that I found impossible to reconcile. Judge Grewal said "there are two people to this conversation and they have presented diametrically opposed accounts of what happened". And as a result he now has to "make a credibility determination based on a cold record".

The court can make that determination -- but if it has to rule on sanctions based on such a determination as opposed to undisputed facts, then the sanctions will probably be light.

I'm not going to take a position on which of these executives is more credible. I did not participate in the conversation. I only wish to mention two things that could affect the court's related analysis:

  • Samsung's lead counsel in the Tuesday hearing, Quinn Emanuel founder John Quinn (who said twice that they "deeply regret" what has happened), attributed the diametrically opposed accounts to the fact that the participants in that licensing discussion weren't native English speakers. He recognized that Scandinavians are usually pretty good at it anyway. As for Samsung's Dr. Ahn, his declaration says in one sentence that he holds "a Ph.D in Materials Engineering from the University of Illinois, Urbana-Champaign" and "a J.D. from Santa Clara University", but then he stresses that English is not his first language. So he's a doctor in engineering, and a doctor in law, and obtained those degrees at U.S. universities. Furthermore, his declaration mentions that "until [he] moved to Korea approximately ten years ago [he] was a member of the California Bar". How can he do any of that -- let alone all of that -- without being fluent in English at least with respect to the topic of the conversation with Nokia?

  • Another credibility issue Samsung faces here is that it refused for months to provide a declaration by Dr. Ahn at all. If a declaration by him could easily clarify everything, why didn't they do this voluntarily?

Again, this does not mean that I doubt Samsung's declaration(s), but these factors could play a role in the court's analysis, the outcome of which will also depend on whether the in camera review leads to the determination that more discovery is needed before a decision.

I'm now going to share the transcript with you, and below that document I'll talk about some implications this has.

13-10-22 Patentgate Hearing Transcript by Florian Mueller

As for the wider industry concern, it's worth noting that HTC immediately made a filing stressing the need for confidential treatment of its settlement agreement with Apple when it saw that Samsung wanted to use it at next month's limited damages retrial. HTC might have done so in any event. But there's definitely more sensitivity to the issue now.

With respect to the Apple-Nokia deal, the genie is out of the bottle and can't be put back. To the extent that Samsung executives submitted sworn declarations, they denied having looked at the information provided to them on the terms of the deal, but there were literally hundreds of recipients. There is considerable risk of this information being used against Apple and against Nokia, not only in negotiations but also in judicial proceedings (I mentioned in my pre-hearing post that an Australian judge wanted to know more about the potential impact on certain litigation down under).

What has happened also has ramifications for antitrust enforcement: the Eurpoean Commission is currently market-testing a set of proposed Samsung commitments that I deem totally insufficient as a model for how the industry should resolve FRAND disputes and particularly unhelpful in connection with Samsung, a party to which the terms of several major license deals were secretly disclosed. Under Samsung's proposal to the EU, which the Commission should have rejected outright instead of conducting a market test (though I doubt it will pass the test), terms would be discussed in secret arbitration unless Samsung consents to an alternative mechanism (instead of making court determinations the standard solution). Samsung could then leverage the information it obtained and get away with it. Not only would it get away with it but it would probably get more favorable deal terms than if there were a level playing field with no one knowing the other party's deal terms.

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Apple brings summary judgment motion against Google's Motorola regarding Qualcomm chips

Yesterday Apple filed a summary judgment motion with the United States District Court for the Southern District of California (where Qualcomm is based) that is a major threat to Google's (Motorola Mobility's) ability to seek U.S. patent injunctions or import bans against Apple over cellular standard-essential patents (SEPs) regardless of what will or will not happen on the FRAND contract front between these companies. In practical terms, if its products using Qualcomm chips (and those which used other baseband chips, such as the iPhone 4, have been discontinued) were found licensed (which involves multiple considerations including the one relevant to Apple's motion), Apple wouldn't even have to win its appeal of a dismissed Wisconsin FRAND obligations case or (in the alternative to a successful appeal) bring a new FRAND determination action to preclude Google from the pursuit of injunctions under the framework laid out by the FTC-Google settlement. Motorola would be unable to seek any remedy (injunctive or monetary) based on cellular SEPs against Apple products coming with Qualcomm baseband chips if Apple succeeds with a patent exhaustion defense.

The Southern California case in which the latest motion was brought is very secretive because it's centered around the benefits a Qualcomm-Motorola patent cross-license agreement Apple claims as a Qualcomm customer, and that license agreement is highly confidential, as are at least certain aspects of Apple's supply chain. Yesterday's filing is heavily-redacted. But at least it's clear what Apple is trying to achieve here ahead of trial.

Initially Apple filed this anti-suit action (a lawsuit seeking to bar someone from filing or pursuing other litigation) in early 2012. It had to rework its complaint twice. Currently, the case is scheduled to go to trial in the spring of 2014. There's no trial date per se, but a date for the final pretrial conference: March 21, 2014. The trial itself will then likely start in April.

The limited information that the general public is allowed to see indicates that Apple seeks to prevail on Count Two of its complaint (in which case the court would find ahead of trial that Motorola's partial termination of a patent cross-license agreement with Qualcomm was ineffective with respect to Apple), defeat seven of Motorola's affirmative defenses, and have the testimony of a Motorola expert (Charles Donohoe, according to his published CV "expert witness for Motorola on license issues in the telecommunications industry" in this matter) excluded. The noted hearing date in the San Diego court is February 7, 2014.

Two public exhibits are dictionary entries defining the word "customer". Patent exhaustion is about a licensee's customers being safe from litigation. I'm not sure if patent exhaustion in a narrow sense applies here, but whatever the contractual basis is, it's a well-known fact in this industry that Qualcomm strives to protect the downstream when it signs patent cross-license agreements. That's a cornerstone of Qualcomm's strategy. It is considered to offer superior protection against third-party lawsuits over cellular SEPs. Even though Qualcomm is much closer to Google/Motorola when it comes to SEP injunctions, which Apple opposes, it is in this exhaustion type of context in Qualcomm's strategic interest that the court find its customer, in this case Apple, protected.

The fact that Apple shows dictionary entries for the word "customer" means that it considers Google's (Motorola's) interpretation of the word, which presumably appears in the Qualcomm-Motorola contract, to be inconsistent with how the word is commonly understood.

For those interested in further detail (and I guess that includes a significant number of my loyal readers in industry circles) I'm now going to publish the full text of Count Two of Apple's second amended complaint as well as the affirmative defenses (by Motorola) that Apple wants to be thrown out.

COUNT TWO

(DECLARATORY JUDGMENT THAT MOTOROLA'S ATTEMPT TO TERMINATE APPLE'S RIGHTS UNDER THE QUALCOMM LICENSE WAS INEFFECTIVE)

67. Apple incorporates paragraphs 1-66 as if fully set forth herein.

68. An actual and justiciable controversy exists between Apple and Motorola with respect to whether Motorola’s attempt to terminate Apple's rights under the Qualcomm license agreement was effective. This is based, inter alia, on (1) Motorola's ineffective attempt to terminate Apple’s right to use Qualcomm components; (2) Motorola's statements in German proceedings that '[t]here is no strategy in place not to challenge [the iPhone 4S]. The fact that the Plaintiff has not yet challenged the 4S in Wisconsin has tactical reasons of a procedural nature, which the Plaintiff naturally will not expose to the Defendant.'; and (3) Motorola's refusal to stipulate that it will not sue Apple for infringement based on Apple’s use of the Qualcomm components outside of Germany.

69. Absent a declaration that Motorola’s attempt to terminate Apple's rights under the Qualcomm license agreement was ineffective, Motorola will continue to wrongfully threaten to assert its patents against Apple’s iPhone 4S, the new iPad, and other Apple products, and thereby cause Apple irreparable harm and injury. The object of this litigation--Apple's ability to continue selling the iPhone 4S, the new iPad, and other Apple products worldwide--exceeds $75,000 in value to Apple.

70. Motorola was not entitled to terminate Apple's rights [REDACTED] It was Motorola who first sued Apple for patent infringement on October 6, 2010, in the United States District Courts for the District of Delaware and the Southern District of Florida, and in the International Trade Commission. [REDACTED] Motorola's purported termination of Apple's rights was ineffective. 71. This is an exceptional case entitling Apple to an award of its attorney's fees incurred in connection with this action pursuant to 35 U.S.C. § 285.

Now Motorola's seven affirmative defenses targeted by Apple's summary judgment motion:

FIRST AFFIRMATIVE DEFENSE

(Laches)

Apple's claims are barred in whole or in part by the equitable doctrine of laches.

SECOND AFFIRMATIVE DEFENSE

(Waiver)

Apple's claims are barred in whole or in part by the equitable doctrine of waiver.

THIRD AFFIRMATIVE DEFENSE

(Equitable Estoppel)

Apple's claims are barred in whole or in part by the doctrine of equitable estoppel.

FOURTH AFFIRMATIVE DEFENSE

(Acquiescence)

Apple's claims are barred in whole or in part by the equitable doctrine of acquiescence.

FIFTH AFFIRMATIVE DEFENSE

(Unclean Hands)

Apple's claims are barred in whole or in part by the equitable doctrine of unclean hands.

SIXTH AFFIRMATIVE DEFENSE

(Judicial Estoppel)

Apple is judicially estopped from proceeding with its claims because of conflicting positions taken in litigation against Motorola in other courts and administrative proceedings.

ELEVENTH AFFIRMATIVE DEFENSE

(Res Judicata and Collateral Estoppel)

Apple's claims and/or some of the underlying factual or legal issues it seeks to prove in support of its claims are barred by the doctrines of res judicata and/or collateral estoppel to the extent that such issues were litigated and decided in other suits or administrative proceedings between or involving Apple and Motorola.

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German court postpones Microsoft patent trial over Google Maps until March 2014

I just learned from a spokeswoman for the Munich I Regional Court that a Microsoft v. Google and Motorola Mobility patent retrial over Google Maps (the service as well as the Android client app) was postponed yesterday from November 7, 2013 to March 13, 2014. The spokeswoman said that Microsoft had moved for this postponement, and Google and Motorola Mobility supported it. She did not state the reasons, but looking at my list of German court hearings I can easily answer this one: the postponement gives the court and the parties the benefit of knowing the outcome of a Bundespatentgericht (Federal Patent Court) nullity (invalidation) hearing concerning this patent on February 27, 2014.

The Federal Patent Court is also based in Munich. So far none of the patents-in-suit in the cases I watch has survived a Federal Patent Court hearing in its granted form, and only one patent (a different Microsoft patent) was salvaged in an amended (narrowed) form. Decisions by the Federal Patent Court can be appealed to the Federal Court of Justice. If the Federal Patent Court upholds Microsoft's patent in February (and this is not an easy one to challenge because it's from the early days of the World Wide Web), the retrial will go forward in March and the question will be whether there is an infringement under the construction applied by the BPatG. So far the regional court appeared strongly inclined to find an infringement, though it stressed the preliminary nature of that assessment.

Originally, Microsoft was suing Motorola Mobility over its Google Maps Android app. But at a first hearing in October 2012, Microsoft's counsel announced an amended complaint adding Google itself to the case as co-defendant alongside the original defendant, Google's wholly-owned and micromanaged Motorola Mobility. This was necessitated by Motorola Mobility's dogged denial of knowledge of how Google's servers operate in connection with the Google Maps service -- a denial that seemed preposterous to me in light of the fact that a Google (not Motorola) in-house lawyer represented Motorola Mobility at that hearing. The amended complaint forced Google to come clean: as a defendant in a German civil lawsuit, you have to deny a patent infringement allegation or you are deemed to concede the facts at the heart of an infringement contention. It also resulted in an increased commercial risk to Google from a possible injunction. Motorola Mobility's German business is small, but Google Maps is obviously a key Google offering, and an injunction would likely result in a global settlement of the Microsoft-Motorola patent dispute.

A decision (which could have been a final ruling, including a permanent injunction provisionally enforceable during appeal) had already been scheduled for June 3, 2013. The announcement was then canceled in favor of a retrial because Google had raised some invalidity contention in post-trial briefing that the court thought warranted a closer look before deciding. The retrial was originally scheduled for yesterday, but last week the court told me that it had been postponed to November 7. And today it turns out that there has been a procedural agreement that a retrial in November discussing the likelihood of one outcome or another of a nullity hearing in February is not a good use of court and party resources. With a nullity trial so close, the hurdle for Google to win a stay would have been relatively low -- at leas psychologically. It's obviously more efficient, as Microsoft apparently suggested, to let the nullity trial take place. The BPatG usually rules at the end of a full-day hearing, and issues its detailed written decision a few months later.

I politically support the idea of low hurdles for stays pending parallel nullity proceedings. I therefore welcome this decision as a matter of principle. However, Google/Motorola trollishly enforced a dead patent walking for 19 months against the push email notification feature of Apple's iCloud service and required Apple to post a $132 million bond in order to give this feature back to its German users. Seeing Google Maps deactivated in Germany before the BPatG rules on the asserted patent would have been an appropriate punishment for Google's unfair behavior against Apple. But let's hope that Google learned its lesson well from merely having had to fear a pre-nullity-ruling injunction against Google Maps, and that it won't apply double standards again next time it asserts a patent against someone in a jurisdiction with bifurcation. I applaud Google for criticizing bifurcation, jointly with Microsoft, Apple and other industry leaders, in connection with Europe's future Unified Patent Court.

Getting back to the Microsoft-Google/Motorola dispute, the postponement of the Google Maps ruling substantially reduces the likelihood of a settlement between these parties for the next several months. Patent litigation can be slow. In the U.S., there will likely be some more activity between these companies after a final FRAND breach ruling is issued. The United States District Court for the Western District of Washington will then likely unstay a number of pending infringement actions between these parties. But there's no firm, near-term trial date in sight.

Motorola Mobility's approach to refuse licensing when 22 royalty-bearing Android patent license deals are publicly-known (20 of them with Microsoft being the licensor who gets paid) is unusual. In fact, the latest Android patent license deal was just announced yesterday, with LG paying Vertical Computer Systems. Only Motorola says no to reasonable licensing and yes to endless litigation, again and again and again. But that doesn't mean Motorola has come up with a superior strategy. It's just that Google, as the company owning and controlling the Android platform, has a broader agenda. It's prepared to spend millions and millions only to continue to claim that Android is "free", when it's not. For example, it can easily afford not to sell any Motorola devices in Germany -- for several months, for years, or even forever -- because it makes most of its money with its search engine monopoly. So what works for a wholly-owned Google subsidiary is still not a viable approach to IP for a Samsung, HTC, LG, Huawei, you name them. Despite its unique parameters,Motorola, too, will ultimately pay Microsoft patent royalties on its Android devices.

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Thursday, October 24, 2013

LG agrees to pay Vertical Computer Systems for another Android patent license

Not all patent license deals are announced, but before today, 21 royalty-bearing Android patent license agreements (20 agreements between Microsoft and Android device makers as well as the Apple-HTC license) had become publicly known. The 22nd deal was announced today in the form of a mediation report in connection with a case pending in the Eastern District of Texas (where Apple yesterday won a jury trial over an infringement allegation by Wi-LAN).

Here's the deal: LG Electronics settled a case brought by Vertical Computer Systems in November 2010. The terms weren't disclosed, but it's a very safe assumption that Vertical did not let LG off the hook without money changing hands. Here's the official mediation report (this post continues below the document):

13-10-24 Vertical Computer Systems - LG Settlement by Florian Mueller

Vertical sued Samsung (with which its negotiations are at an "impasse" according to another mediatin report) and LG over two patents covering a "system and method for generating websites in an arbitrary object framework". This is obviously a software patent family, and the infringement allegations were about Android. It appears that claim construction went fairly well for Vertical (but I haven't analyzed this in detail because I focus on litigation between large operating companies).

A trial was scheduled for early May 2014. If Samsung doesn't settle in the meantime, then that trial will go forward in little more than six months.

Unless things change during the course of further litigation including appeals, Vertical may have quite some growth opportunity in Android patent licensing.

As I explained when I first reported on this case, Vertical is not a troll. Patent licensing is of increasing importance to its business, though. Yesterday Vertical announced the impending issuance of another patent, U.S. Patent No. 8,578,266 on a "Method and System for Providing a Framework for Processing Markup Language Documents".

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Wednesday, October 23, 2013

Federal Circuit schedules Oracle v. Google appellate hearing for December 4, 2013

In six weeks from today, the United States Court of Appeals for the Federal Circuit will hear Oracle's Android/Java copyright appeal against a ruling by Judge Alsup in the Northern District of California, who sided with Google on a copyrightability question that was outcome-determinative for the most important part of the case: he deemed the "hijacked" declaring code of the Java APIs not to be copyrightable.

This morning by Eastern Time the world's leading appeals court for intellectual property matters issued the following notice of calendaring (click on the image to enlarge or read the text below the image):

NOTICE OF CALENDARING. Panel: 1312H. Case scheduled Dec 04, 2013 10:00 a.m. at the United States Court of Appeals for the Federal Circuit (Howard T. Markey National Courts Building, 717 Madison Place, N.W. Washington, DC 20439), Courtroom 402. Response to oral argument order due: 11/15/2013. Counsel should check-in 30 minutes prior to the opening of the session. Please review the Oral Argument Order. [112135] [13-1021, 13-3067, 13-5041, 13-1204]

Oracle has several high-profile copyright lawyers on its team, and its lead counsel will be Orrick Herrington Sutcliffe's Joshua Rosenkranz, a leading appellate lawyer who recently won an important Federal Circuit appeal for Apple (reviving its ITC case against Google's Motorola Mobility) and is on the winning track in another Apple v. Google matter before the same court, likely leading to a once-denied Chicago trial over the Steve Jobs patent and other key Apple patents. On December 4 the "Defibrillator" will be at work again in Washington DC.

As for the arguments raised on appeal, let me refer you to a few of my previous posts. I'll definitely write some more about this in the build-up to the appellate hearing. For now I just wanted to share the scheduling information with you immediately.

The key issues in this case (mostly copyrightability, but also "fair use") are of great interest and concern not only to these parties but also to many other stakeholders. Either party has support from academics, but Oracle's positions are shared to a hugely greater extent than Google's by industry leaders and creatives. A former U.S. copright chief also agrees with Oracle that the lower court's ruling is a fundamental threat to intellectual property protection (he said it "eviscerates" copyright protection for software), and urged reversal.

I look forward to December 4, and I'll analyze the official recording as soon as it becomes available.

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Tuesday, October 22, 2013

Patentgate: Apple urges court to impose "severe sanctions" on Samsung, which contradicts Nokia

Today at 1:30 PM Pacific Time the United States District Court for the Northern District of California will hold an Apple v. Samsung sanctions hearing relating to the "Patentgate" scandal involving improper disclosures of highly confidential terms of Apple's license agreements with Nokia, Ericsson, Sharp, and Philips. There's going to be a huge fight over whether Samsung and its lawyers should be sanctioned, but also over whether Samsung should additionally be sanctioned for contempt of a related discovery order.

Dozens of Patentgate-related documents were filed yesterday by Apple, Nokia and Samsung. While I usually try to comment rather quickly on new filings, I took my time to understand the parties' positions:

  • The details of Nokia's positions are unclear due to far-reaching redactions. It's closer to Apple than Samsung on this one, but apparently not 100% aligned in the discovery context.

  • Samsung denies wrongdoing of the punishable kind. It says that whatever its lawyers did was inadvertent, and things like this just happen when you have a huge dispute involving truckloads of documents. In particularly, it has produced various sworn statements according to which different Samsung employees don't remember having seen the terms of the Apple-Nokia license agreement -- and one declaration that contradicts statements made by Nokia (will go into more detail on that one further below). Samsung calls the whole Patentgate matter a "satellite litigation" and the related discovery a "fishing expedition" by Apple and Nokia that should be brought to an end now. Samsung says it has "moved mountains in its effort to comply with the Court's Orders".

  • Apple wants more discovery, which it says Samsung obstructs by claiming privilege where the "crime-fraud exception" applies (which is going to be the key legal issue at today's hearing, given that Samsung disagrees completely), and argues that what has been produced anyway leads to the "inescapable conclusion" that Apple is right. Still, Apple wants more light to be shed on what happened, including that Samsung's external lawyers in multiple countries should also have to provide sworn declarations on their receipt and use of the relevant information.

    According to Apple, the court "should order the additional requested discovery--and ultimately, order severe sanctions--to convey to Apple and the many others watching this proceeding with heightened interest that they can trust protective orders to secure even their most sensitive information when produced in discovery". Not only should there be sanctions for the disclosures themselves but "Samsung and its lawyers should [also] be held in contempt for their knowing failure to comply with the Court's October 2, 2013 Order".

All of the above sets the stage for a really hard fight today.

I also found some other interesting tidbits in the filings. For example, Justice Bennett of the Federal Court of Australia also referred to these disclosure issues in an order dated October 11, 2013, and on Thursday may look again at the "issue of the breach of the external counsel only confidentiality regime in the Australian proceeding". Another filing refers, in the publicly-accessible part, to a "filing" of whatever kind (but apparently related or at least relevant to Patentgate) in Italy. And last week I published the headlines of certain documents filed with the ITC in this regard.

At the now-famous Nokia-Samsung licensing negotiation meeting in June, Samsung apparently made Nokia an offer (the terms of which are unknown), which Nokia rejected (otherwise we'd have heard of a deal between them by now), but which it considered for about an hour (it requested a break for this purpose).

The part that could really get nasty is that there appears to be a huge discrepancy between Nokia and Samsung's accounts of what Samsung's chief licensing executive, Dr. Ahn, said at the June meeting about his knowledge of the Apple-Nokia license deal terms. The original declaration by Nokia's Paul Melin is unavailable, so I can't compare directly the declarations of the two key participants in the meeting. There could be a situation now in which only one of two sworn declarations can be accurate, and in that event I'm obviously not going to take a position on who tells the truth (or more of the truth) because only the participants in the meeting know what was and what wasn't said. All I can do is report on what publicly-accessible documents say.

Here's how Judge Grewal described what Nokia's Paul Melin stated in his declaration:

"According to a declaration from Nokia's Chief Intellectual Property Officer, Paul Melin, on June 4, 2013, in a meeting between Samsung and Nokia licensing executives, Dr. Seungho Ahn informed Nokia that the terms of the Apple-Nokia license were known to him. Specifically, according to Mr. Melin, Dr. Ahn stated that Apple had produced the Apple-Nokia license in its litigation with Samsung, and that Samsung's outside counsel had provided his team with the terms of the Apple-Nokia license. Mr. Melin recounts that to prove to Nokia that he knew the confidential terms of the Apple-Nokia license, Dr. Ahn recited the terms of the license, and even went so far as to tell Nokia that 'all information leaks.' Mr. Melin also reports that Dr. Ahn and Samsung then proceeded to use his knowledge of the terms of the Apple-Nokia license to gain an unfair advantage in their negotiations with Nokia, by asserting that the Apple-Nokia terms should dictate terms of a Samsung-Nokia license."

But Judge Grewal also said "[i]t is possible that Dr. Ahn's encounter with Mr. Melin occurred very differently", and therefore ordered Samsung to provide sworn testimony from Dr. Ahn. That declaration explains that he doesn't really remember receiving or reviewing any of the documents containing the related disclosures (which is also what other Samsung witnesses say -- they don't deny that it happened, but they do deny that they remember it). Instead, he says his estimates of the deal terms "came from multiple media reports and discussions with non-Samsung lawyers and representatives of other companies who have negotiated with Samsung". And now comes the part where Samsung's representation of the discussion of the Apple-Nokia deal at the Samsung-Nokia meeting appears irreconcilable with Nokia's testimony as summarized by Judge Grewal:

"22. I am certain that I did not tell Mr. Melin at the June 4, 2013 meeting that I received Apple/Nokia licensing terms from my outside counsel in the Apple/Samsung case, because it is not true, and because it would be a very foolish thing to say. I hold a J.D. from an American law school, Santa Clara University, and until I moved to Korea approximately ten years ago I was a member of the California Bar. I am well aware of the importance of protective orders in United States litigation. I have been responsible directly or indirectly for the supervision of hundreds of patent litigations. In most, if not all of them, a protective order is entered. These invariably cover license terms which I know from experience are highly confidential and sensitive information. The confidentiality of this type of license information is as important to Samsung as it is to any other technology company. It would be incredibly reckless for me to have made such a comment to Nokia. It would amount to my admitting to an adversary that our outside counsel and Samsung had violated a protective order protecting the adversary’s information and that I was attempting to use the information gained by such a violation to negotiate license terms. The idea that I would violate a protective order is simply wrong, and the idea that I would tell my adversary that I and my outside counsel had violated it and furthermore were violating it in that very instance by trying to profit from its use is preposterous. [REDACTED]

23. I may have used the word 'leak' at the June 4th, 2013 meeting with Nokia, or some other word to reference the idea that all information gets out, though I don't recall the precise phrase I used. I do believe that there may have been some sort of leak due to the contemporaneous media reports outlining the terms of the Apple-Nokia license. But I cannot be certain of this. It has in fact been my own experience that information gets out. I know this from my own experience and I recounted to Mr. Melin a situation a few years ago where Samsung had entered into a confidential settlement with another company and very shortly thereafter everyone in the industry seemed to know it."

On this basis, Samsung's lawyers claim that "[t]he full record now confirms that Nokia's allegations concerning Dr. Ahn are not only implausible but factually false". Again, I'm not going to speculate on who's more or less likely to tell the truth here. It's just hard to imagine how they could both be right at the same time...

I'll try to obtain a transcript after today's hearing and I look forward to different media reports.

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Saturday, October 19, 2013

Samsung to face allegations of copying Apple once again at next month's damages retrial

Starting November 12 (that's in three and a half weeks from today), the Apple v. Samsung limited damages retrial will be held in the Northern District of California. On Thursday (October 17), Judge Lucy Koh held a pretrial conference, and late on Friday she entered a pretrial conference order.

There will be other pretrial orders, and also some further briefing on certain issues in the build-up to another pretrial conference on November 5. For example, the court appears inclined not to allow references to the Apple-HTC license agreement, but Samsung still has the chance to make a case for why such references should be allowed. The incomplete nature of the Friday order and limited access to information on the parties' damages calculations make it hard, and in some respects impossible, to assess who primarily benefits from the order. As far as I can see, it appears pretty balanced. Both parties have prevailed on various items that matter to them. I'm now going to focus on two of Apple's victories for only one reason: the relevance of those victories and the topics they relate to are easily understood from the outside.

I'll show you the order before discussing it further below:

13-10-18 Apple v. Samsung Pretrial Conference Order by Florian Mueller

The very first item, granting Apple's motion to exclude evidence regarding patent reexamination proceedings, is not surprising, but it's definitely useful to Apple. While Samsung will be allowed to present some testimony concerning infringement and validity, it faces an uphill battle because the jury will be instructed that infringements were identified (and that the new jury's job is only to determine damages). References to non-final reexamination decisions and to whatever statements Apple may have made to examiners could have muddied the water considerably in Samsung's favor. I think the court is right to avoid jury confusion.

The other item I wanted to highlight is about an issue I addressed in two previous posts. Samsung alleged that Apple wants to "smear" it on copying and "inflame the jury" in the upcoming damages retrial with allegations of copying. Apple argued that it's key for the jury to learn about anything relevant to demand, such as "whether it is more probable than not that, in the absence of infringing Samsung products, consumers would have purchased more iPhones and iPads". Apple also made the following statement on the distinction between competition and copying:

"Apple thinks competition is great, when each competitor comes up with its own unique ideas and the customer decides what they like better. Copying is not fair competition, because when one company copies the ideas of another company, they are trading off all the good will and investment that the second company built on its own ideas, and taking all that investment for itself. Samsung's actions have had a large impact on the smartphone market, by diminishing the value of Apple's ideas, particularly its unique designs, and negatively impacting Apple's sales, both by initial purchasers and because purchasers enter the Samsung ecosystem rather than Apple's."

Judge Koh has denied Samsung's motion to exclude evidence of "copying" without prejudice (meaning that case-by-case objections at trial are still permitted). It was probably a smart move by Apple to clarify that its damages expert was not going to use the word "copying" anyway, demonstrating a focus on facts and an intent not to "smear" Samsung.

In connection with copying I'd like to point to a MacNewsWorld article quoting analyst Trip Chowdhry on the significance of the USPTO's confirmation of the "Steve Jobs patent" (which is not going to be at issue in the California retrial; Apple asserted it against Samsung at the ITC, and an import ban over two patents including this one is already in force). I often disagree with financial analysts, and I have disagreed on a couple of past occasions with Mr. Chowdhry. But the following statement is worth highlighting:

"There is no substitute for innovation -- it is a key driver for growth," Chowdhry explained, "but relying on imitation is a losing strategy as well, and Samsung has been heavily imitating Apple in many respects."

So far, Samsung's success in the marketplace does not suggest that "imitation is a losing strategy". Samsung's (high-quality and partly creative) imitation of the iPhone has been and continues to be a huge commercial success. Anyway, "strategy" is about sustainable success, not about what used to work.

Only IP enforcement can turn imitation into a losing strategy. Enforcement requires meaningful remedies. The limited damages retrial won't result in a damages award so devastating to Samsung that it will back down, but Apple has the chance to make at least some progress. What's more important is injunctive relief, and I believe we're going to see a Federal Circuit decision soon. An appellate hearing went very well for Apple in early August.

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Friday, October 18, 2013

ITC starts first FRAND-related public interest consultation since Presidential veto of iPhone ban

In early August, the Obama Administration vetoed an ITC exclusion order relating to older iPhones and iPads on public interest grounds and indicated that it expects the U.S. trade agency to carefully consider the public interest before ordering import bans over FRAND-pledged standard-essential patents (SEPs). But there are still various SEP cases pending before the ITC, and patent holders have already made different suggestions as to how the U.S. trade agency could justify SEP-based exclusion orders in a post-veto world.

Two SEP investigations have reached the stage of a Commission review (the Commission being the six-member decision-making body at the top of the ITC) since the Presidential veto. On September 4, the Commission decided to conduct a full review of a preliminary ruling clearing Nokia, Huawei and ZTE of violation of various InterDigital patents. But in its review notice it stated that it "is not interested in receiving written submissions that address the form of remedy and bonding, if any, or the public interest at this time". This means that if InterDigital obtains a reversal of any non-liability finding, a second round of submissions will have to be requested to address FRAND-related public interest issues.

The fact that the ITC does not request FRAND-related submissions right away on a "just in case" basis could mean that the probability of a liability finding in InterDigital's favor is not too high. But it could also be due to the fact that there are so many liability-related questions to be analyzed in that investigation that the trade agency would need more time anyway if any FRAND questions later became outcome-determinative.

With a view to ITC complaints by the likes of InterDigital I'd like to highlight an opinion piece recently published by the Wall Street Journal, authored by a former ITC commissioner who says the agency "has drifted from its original mission" and has become the "International Trolling Commission". The debate over the ITC's role is part of a wider patent reform discussion in the U.S., and the ITC's jurisdiction over complaints by patent troll as well as its jurisdiction over SEP cases will remain controversial until abolished.

Yesterday the ITC decided to conduct another full review of an investigation involving FRAND issues. That investigation of an LSI/Agere complaint against Funai and Realtek was of interest to a very few people in the world until a federal judge in the Northern District of California ordered a preliminary injunction barring complainants from enforcing an exclusion over over a SEP should they win one against Realtek.

In the LSI/Agere case, the Administrative Law Judge did not find (in a preliminary ruling) Realtek to infringe a SEP, but the ITC's review notice does raise FRAND-relate public interest questions right away. All of the Commission's public interest questions are about FRAND, with a particular focus on negotiations between the parties:

  1. Please discuss and cite any record evidence of the allegedly [F]RAND-encumbered nature of the declared standard essential '663, '958, and '867 patents. With regard to the '958 patent and the '867 patent, what specific contract rights and/or obligations exist between the patentee and the applicable standard-setting organization, i.e., the Institute of Electrical and Electronic Engineers, Inc. (IEEE)? With regard to the '663 patent, what specific contract rights and/or obligations exist between the patentee and the applicable standard-setting organization, i.e., the International Telecommunication Union (ITU)?

  2. Please summarize the history to date of negotiations between LSI and Funai and between LSI and Realtek concerning any potential license to the '663, the '958, and the '867 patents, either alone, in conjunction with each other and/or the '087 patent, and/or in conjunction with non-asserted patents. Please provide copies of, or cite to their location in the record evidence, all offers and communications related to the negotiations including any offer or counteroffer made by Funai and Realtek.

  3. Please summarize all licenses to the '663, the '958, and the '867 patents granted by LSI to any entity including evidence of the value of each patent if such patent was licensed as part of a patent portfolio. Please provide copies of, or cite to their location in the record evidence, all agreements wherein LSI grants any entity a license to these patents. Please also provide a comparison of the offers made to Funai and/or Realtek with offers made to these other entities.

  4. If applicable, please discuss the industry practice for licensing patents involving technologies similar to the technologies in the '663, the '958, and the '867 patents individually or as part of a patent portfolio.

  5. Please identify the forums in which you have sought and/or obtained a determination of a [F]RAND rate for the '663, the '958, and the '867 patents. LSI, Funai and Realtek are each requested to submit specific licensing terms for the '663, the '958, and the '867 patents that each believes are reasoanble and non-discriminatory.

  6. Please discuss and cite any record evidence of any party attempting to gain undue leverage, or constructively refusing to negotiate a license, with respect to the '663, the '958, and the '867 patents. Please specify how that evidence is relevant to whether section 337 remedies with respec to such patents would be detrimental to competitive conditions in the U.S. economy and other statutory public interest factor.

The fifth question is the most interesting one in this particular case because it relates to the proceedings in Judge Whyte's court in Northern California.

The ITC's questions are broad and general. All that can be said at this stage is that the ITC wants to look at these questions in detail, including reasonable royalty rates, an area in which it doesn't have much expertise (if any). I interpret this FRAND questionnaire as an attempt by the ITC to encourage SEP holders to pursue import bans despite the recent veto. Even though it's now going to be harder than before to win a SEP-based exclusion order from the ITC and to actually enforce it, the ITC portrays these FRAND issues as highly case-specific, which is a way of creating legal uncertainty that could result in settlements. And such uncertainty is, in and of itself, not in the public interest.

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