Saturday, May 31, 2014

27 law professors support Samsung's efforts to get Apple's $929 million damages award reduced

Thanks to a Comparative Patent Remedies blog post by Professor Thomas Cotter, I have just become aware of an amicus curiae brief (full text available here) filed with the Federal Circui by 27 law professors in support of Samsung with respect to the design patents-related bulk of Apple's $929 million damages award in the first California Apple v. Samsung litigation. On Thursday I had shared some observations on Samsung's opening appellate brief in that case and its post-trial JMOL motion in the second California case.

14 months ago, three of the 27 signatories of that amicus brief -- Professors Cotter, Ghosh and Strandburg -- submitted, jointly with a fourth colleague of theirs, an amicus brief with the same appeals court but in support of Apple, with respect to FRAND, in the "Posner" Apple v. Motorola case. I don't have a patent on applying consistent standards to Apple's offensive claims against others as I did and do to other companies' offensive claims against Apple.

Several other amicus briefs that apparently (based on the timing of their filings and, in part, positions they have previously taken on related issues) support Samsung's appeal were filed on Friday, but I haven't been able to access them. Amici curiae include the Computer & Communications Industry Association (with which I strongly disagree on Oracle v. Google), the Hispanic Leadership Fund, The National Grange of the Order of Patrons of Husbandry, and The National Black Chamber of Commerce. I believe those organizations are concerned about competition in the U.S. smartphone market and the effect Apple's litigation campaign against Android could have on consumer choice and price levels. I understand where they are coming from, but Apple's patent assertions against Android devices have been too unsuccessful to have competitive impact (though Apple's objectives are a different thing).

The group of 27 law professors was led by Stanford's Mark Lemley (with whom I disagree on Oracle v. Google and on "baseball arbitration"). Apple requested his disclosure of a relationship (through a law firm) with Google. I'm in favor of transparency -- but within reason. Design patents are an Apple v. Samsung issue that is, at best, indirectly an Android issue. Again, three of the signatories supported Apple last year in the FRAND context, which shows to me that this here is about issues, not affiliation.

The second signatory on the list is Sarah Burstein (University of Oklahoma). As her web profile says, "Professor Burstein's scholarship focuses on design law, with a particular focus on design patents". I have been in contact with her via Twitter on a few occasions and noted that she studied Art & Design before she became a law professor. She's definitely a person whose opinion on reasonableness in design patent remedies should bear considerable weight with the Federal Circuit. There are various other well-known signatories. I can't discuss them all here, but the list is impressive, though impressive lists don't always guarantee spot-on amicus briefs, as Oracle v. Google showed.

The law professor's amicus brief is all about how to interpret and apply 35 U.S.C. §289, which provides an "additional remedy" for design patent infringement: a disgorgement of infringer's profits. At the 2012 trial and the 2013 limited damages retrial, Judge Koh allowed Apple to seek a disgorgement of the totality of infringer's profits -- as opposed to an apportionment that would take into account that any profits Samsung generated in the U.S. market with certain smartphones years ago was attributable to a number of technical characteristics and not just some patented designs.

The amicus brief argues that the notion that an infringer's entire profit (on an infringing article) should be recoverable goes back to the 19th century, when only knowing infringement resulted in liability, while "even independent designers are [under today's strict liability regime] on the hook for patent infringement in modern design patent law". Moreover, U.S. lawmakers back in 1887 (when Congress decided to provide the disgorgement remedy for design patent infringement) had products such as carpets in mind, where "it is the design that sells the article". The brief shows that Apple itself holds various design patents related to the iPhone -- casing-related ones, icon-related ones, screen layout-related ones. It's obviously impossible that each of a plurality of design patents could on its own be the sole driver for demand.

A 19th-century approach may also be the wrong one to 21th-century technologies, the law professors argue:

"The world is more complex than it was in 1887, and so are products. The likelihood that a product has more than one patented design is much greater than it was in 1887. Virtual designs on things like icons are particularly likely to overlap, and there are more and more of them. [...] And if there is more than one patented design in a product, the syllogism that the design patent drives the sale of the product falls apart.

Nor does all the value of a product come from design patents. People don't buy iPhones simply because they look cool; they buy them because they function. Those functions are both of intrinsic value and are subject to many utility patents. [...]"

This is what they'd like the Federal Circuit to do:

"This Court should require proof of some connection between the patented design and the defendant's profits, and order the district court to remit the award of profits to the extent it exceeds those profits attributable to the patented designs."

I'm much more focused on software patents than design patents, so I don't have a firm opinion. Until I read this amicus brief, I was under the assumption that there was nothing Samsung would be able to do about Apple's pursuit of a disgorgement of Samsung's entire profit with any products found to infringe valid Apple design patents. I'm no longer sure. I definitely agree with the law professors that it doesn't make sense to assume that a single design patent represents the whole commercial value of a complex technology product. Maybe Congress should change the statute. Maybe the professors are right and the Federal Circuit would be in a position to give the statute an interpretation reflective of modern-day realities. I can't offer a prediction as to what will happen, except that I guess Chief Judge Prost (who will likely be on the bench, not just because of the high profile of this case but because of her involvement with previous Apple-Samsung matters) will probably be fairly receptive to the law professors' argument (which doesn't necessarily mean she'll adopt it -- it just means that she'll likely be receptive to the idea of greater reasonableness in design patent remedies, and then it depends on how much wiggle room she'll conclude the courts have based on what Congress did back in 1887).

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Thursday, May 29, 2014

Patent royalties may exceed $120 per smartphone, undermine industry profitability: working paper

A working paper by an Intel in-house counsel and two WilmerHale lawyers, The Smartphone Royalty Stack: Surveying Royalty Demands for the Components Within Modern Smartphones, has just been published (direct link to PDF). Intel Vice President and Associate General Counsel Ann Armstrong and WilmerHale's Joseph Mueller and Timothy Syrett have made an invaluable contribution to the debate over reasonable royalties and incentives for innovation in this field.

This first-rate paper finally answers the billion-dollar question everyone with an interest in smartphone patents has been asking for some time: the total licensing cost per device. The authors have thoroughly researched the licensing environment and highlight various key facts that should give policymakers, regulators and courts pause. They note that royalty stacking, "in which the cumulative demands of patent holders across the relevant technology or the device threaten to make it economically unviable to offer the product, [...] is not merely a theoretical concern" (as, by the way, the likes of Qualcomm allege). Based on publicly-available data, these competent authors "estimate potential patent royalties in excess of $120 on a hypothetical $400 smartphone--which is almost equal to the cost of [the] device's components" (estimated to be $120 to $150 in total based on figures published by Nomura Securities in reliance on Gartner data). They conclude that "those costs may be undermining industry profitability--and, in turn, diminishing incentives to invest and compete". I also believe that smartphone-related patent licensing costs, relating to standard-essential as well as non-standard-essential patents, must come down. Policymakers, antitrust enforcers and judges -- Judge Posner certainly did his best in this regard -- will hopefully bring those fees down in the years ahead.

The paper does properly distinguish between royalty demands and actual royalty payments. Patent holders frequently have to lower their demands during the course of negotiation. Cross-licenses and "patent exhaustion arising from licensed sales by component suppliers" can also make a major difference, but the terms on which companies actually agree are usually kept confidential. Royalty demands sometimes surface in litigation.

The authors based their study entirely on public documents. They (especially the WilmerHale lawyers, who, among other things, defend Apple against Samsung's counterclaims) have obviously seen some confidential license agreements, but couldn't make use of any of that information for their working paper. They also don't speak for any particular company or firm. Apple just demanded a "reasonable royalty" of $40 per device from Samsung at the recent California trial, for five software patents. Now a paper authored in part by lawyers representing Apple against Samsung (with a defensive focus, but still) says that $120 per device for everyone's patents, -- hardware and software patents, standard-essential and non-standard-essential patents -- may be "diminishing incentives to invest and compete". This shows independent thinking and writing. I would not be surprised to see Samsung's lawyers quote certain key findings of this study in their U.S. litigations with Apple. The paper appears slightly Apple-friendly to me in the context of the design patents-related part of Apple v. Samsung, but within reason (I agree in principle with what it says about that). The study also notes that UI patents can typically be worked around, and "[a] truly distinctive and innovative user interface--as distinct from a copied or derivative design--may result in minimal or no royalty exposure".

One key characteristic of the study is that it analyzes licensing costs on a component-by-component (including software components) basis: cellular baseband chip, random access memory (different kinds), flash memory (different kinds), WiFi, Bluetooth, GPS, NFC, battery, power management, audio (different subcategories such as MP3), camera/video (non-standards-based as well as standards-based formats like JPEG and H.264), applications processor, operating system, other pre-installed software, SMS, MMS, email, W3C (royalty-free standards), UPnP (royalty-free), digital media sharing, USB, user interface, outer design (also an area in which the study notes that infringement can be easily avoided).

The study has a much broader focus than my own litigation monitoring in recent years. Its findings appear plausible to me, except that I believe the "operating system" part of the royalty stack is underestimated. No operating system patent holder ever told me what their demands or actual deal terms were, but a couple of years ago I downloaded a litigation-related document that was publicly accessible for less than a day on the ITC document system that mentioned a major operating system patent holder's royalty demands. Against that background I think the study published today is very conservative (to say the least) with respect to operating system patent licensing costs -- but this, if anything, reinforces the overall message.

This is not a policy paper per se, but it does raise and stress policy concerns, particularly about non-practicing entities (NPEs), colloquially often referred to as "patent trolls", and the growing problem of "privateering" (patent transfers from major operating companies to NPEs in order to hide behind others that will assert patents aggressively against the original patent holder's competitors). Certain patent holders' demands, tactics and positions are discussed as examples of factors that exacerbate the royalty-stacking problem. Those patent holders include Ericsson and, to a far greater extent, Nokia, a company that has sold patents to a number of NPEs in recent years and is itself increasinly turning into a patent assertion entity.

This paper is recommended reading for everyone with an interest in smartphone IP issues from a legal and/or economic point of view. It's particularly recommended reading for all those who could, through their actions and decisions, address at least parts of the problem this paper describes. I believe it will be quoted a lot in court documents and academic writings in the years ahead.

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Samsung seeking reversal or adjustment of Apple's $929 million and $119 million jury verdicts

This week, public versions of two key documents filed by Samsung last Friday in connection with two Apple cases became available:

The opening appellate brief in the first case has 83 pages, and the JMOL motion in the second case has 46 pages. Those documents are surely voluminous, but that's the nature of the beast: there's a number of issues (both in a nonjudgmental and a judgmental sense) in both cases.

In case you're interested in all or some of the detail, I will now show you both documents before I share my high-level observations on Samsung's strategies for reversal/adjustment.

Here's the opening appellate brief:

14-05-23 Samsung Opening Brief in Appeal of First Apple Case by Florian Mueller

And this is the JMOL motion:

14-05-28 Samsung Motion for JMOL in Second Apple Case by Florian Mueller

As I noted on Saturday in a blog post on Apple's request for a retrial in the second California case, the post-trial roles of these parties differ greatly between the two cases. Apple's approach to the original (pre-adjustment) 2012 billion-dollar jury verdict was "Please don't touch it", apart from limited adjustments in Apple's favor that would not require a retrial of previously-tried issues. Samsung, however, has been challenging that 2012 verdict for almost two years now, from all angles, and its opening brief on appeal raises a far greater number of issues than I've seen in any other smartphone IP case apart from the "Posner case".

In the second case, Apple is now so unhappy with the outcome (a mixed ruling since Apple was also found to infringe a Samsung patent, and in terms of damages, only 5-6% of what Apple sought) that it wants a complete retrial on damages (and on willfulness, without which it wouldn't even be able to seek damages enhancements for more than a tiny portion of the award). Samsung is still trying to bring even the $119 million figure down, but it has no appetite at all for another jury trial, presumably knowing that it would be rather difficult to obtain a more favorable outcome in front of a Silicon Valley jury. The next jury, if there was one (I think the dispute will be settled before any retrial even could happen), might be just as biased against Samsung as the 2012 jury was and U.S. juries frequently are, based on statistics that a now-Federal Circuit judge published (Xenophobia in American Courts).

Samsung has so many different attack vectors against those two California decisions that it's hard to see the forest amid all the trees. In the first case, if the appeals court agrees with Samsung on any liability or jury instructions issue, there will have to be another California trial (the third one just in the first case alone). Depending on what issue works out for Samsung on appeal, there could be a pretty complete damages retrial, possibly along with a new liability trial on design patent infringement. Apple still hasn't collected one cent of the 2012 award, and if another retrial was needed, it wouldn't get any for a few more years.

Samsung raises liability and damages issues in both cases, but the emphasis on bringing down the damages award is particularly strong and clear in the first case. When I read Samsung's opening appellate brief, I got the impression that Samsung doesn't take Apple's asserted patents seriously in a strategic sense. It's really just about money, and the damages award has also been used by Apple for PR purposes, so it's not just about money changing hands but also about the perception game. But there is no sign of Samsung being worried about Apple's software patents-in-suit in the first case:

  • Samsung is not challenging liability for the '381 rubberbanding patent -- the only feature end users would define and describe as a feature that Apple has so far been able to sue out of Android devices -- neither with respect to validity (which would be hard after the USPTO upheld the asserted claim last summer, giving that claim the benefit of a strongly enhanced presumption of validity over the prior art the patent office evaluated in its reexamination) nor infringement. I don't think there would have been a good non-infringement argument anyway, but Samsung has worked around this patent (by throwing out the feature) and doesn't appear to be so desperate to bring the feature back that it would try a long shot to overturn the liability finding.

  • In fact, Samsung is not challenging any of Apple's three software patents-in-suit in the first case with respect to past infringement.

  • But Samsung has strong invalidity arguments with respect to the '915 pinch-to-zoom API patent and the '163 tap-to-zoom-and-navigate patent (in that order):

    • The USPTO has rejected all claims of the '915 patent as a result of an anonymous reexamination request; Apple has appealed that decision to the Patent Trial and Appeals Board (PTAB) and will have to file its opening appellate brief in July. This battle isn't over yet, but it's an uphill battle for Apple at this stage.

    • The '163 patent is so extremely narrow (it doesn't cover all tap-to-zoom functionality but is infringed only if after the original tap-to-zoom action there is a second operation that centers a different part of, for example, a website) that Samsung would probably have ignored it on appeal if it didn't have a pretty straightforward invalidity argument that will be very easy for the Federal Circuit to adjudicate: the claim term "substantially centered" is allegedly indefinite.

      Since the '163 patent is strategically irrelevant, I never cared to study it in all detail. Without even looking at this issue in greater detail, I can certainly say that a term like "substantially" is quite problematic in a patent claim, especially in the U.S. where indefiniteness is frequently a basis for challenging claims. The conventional approach to patent claim drafting is that you want to be binary: these are the elements, and every one of them is there. You wouldn't even want to say "or" in a U.S. patent claim (outside the U.S. that's different) but instead refer to "at least one of [a list of options]". Quantitative attributes may make sense in certain sciences (for example, specifying a temperature range for a manufacturing process), but then you want to be numerical, not vague. If you have a binary claim and then argue in an infringement case that something is "substantially" the case, that's a different thing. But the claim itself should be binary.

      Even if the '915 patent surprisingly survived, an invalidity finding (for indefiniteness) of the '163 patent would require a pretty complete damages retrial.

Due its focus on bringing down the damages amount, Samsung's appellate strategy in the first case is design patent-focused. Most of the damages related to design patents, with respect to whch Apple sought a disgorgement of infringer's profits. I'll take a closer look at the design patent-related arguments during later stages of the process (at least I want to see Apple's response). There are also some trade dress issues in this case and I can't promise I'll ever go into detail on them. There's just one thing relating to designs that I wish to highlight because it looks like a very key issue on appeal. Judge Koh didn't allow Samsung to present evidence of what it calls "pre-iPhone independent development" of similar designs, in particular, the "F700" design. According to Samsung's brief, "Apple itself saw the F700 as so similar to the iPhone that it accused the F700 of being a copy of the iPhone before learning the actual pre-iPhone chronology of the F700's development". This really would have been, and could be on remand, a silver bullet for Samsung in its efforts to counter Apple's "copying" allegations.

JMOL motion (in the second case)

Now on to the JMOL motion in the second case. At this procedural stage it's harder to see a party's priorities: requests for the judge to overrule the jury are usually much more comprehensive and less focused than appellate briefs. Still, it's easy to see here that the '647 "quick links" patent is a key issue. It's the first one Samsung raises in its JMOL motion; it devotes more pages to this one than to any other issue; and this will presumably also be the number one topic on appeal. In my post on Apple's injunction request I discussed the complex procedural situation here following the Apple-Google second-class settlement. Samsung is challenging the '647 patent mostly on the infringement but also on the validity side. The recent construction of the patent by the Federal Circuit creates opportunities for non-infringement and invalidity arguments at the same time.

Samsung argues that it was Apple's choice to base its '647-related arguments on a broader claim construction than the one the Federal Circuit ultimately affirmed (Samsung says "Apple 'shot for the moon'"), and "Apple's risk failed" when the appeals court handed down its opinion in what I always just call the "Posner case".

Samsung's JMOL motion refers to the history of this patent -- a fact I also mentioned a couple of times before:

"Apple filed this patent in 1996 when it was selling desktop Macintosh computers, well before any work on a mobile phone and over a decade before Apple would release the iPhone. Apple's attempts to force this old client-server patent onto mobile phone applications by avoiding the properly limiting claim construction has come to naught: on the last day of trial, in a case between Apple and Motorola involving the same patent, the Federal Circuit confirmed the constructions that Samsung believed correct--[the 'Posner construction']."

The heart of the '647 claim construction issue is indeed that this is not an iPhone patent but a 1990s Macintosh patent. If it's interpreted the way it should be in light of its history, then Apple can't get much mileage (if any) out of it against Android device makers.

Samsung is still trying to get all patents-in-suit invalidated, which is its only defense (after a summary judgment decision by Judge Koh) against the '172 "autocomplete" patent (which the USPTO decided to reexamine). I believe Samsung can shoot down at least a couple of Apple's patents-in-suit in the second case. Some of it will take time including appeals and reexaminations, but Judge Koh also declared a Samsung patent invalid after the first trial, and this time around she should think very hard about invalidating at least a couple of Apple patents since there are reasonably strong invalidity arguments that the jury apparently didn't consider (U.S. juries always overrate the validity of patents, especially when they have to make their decisions based on propaganda videos and an extremely selective presentation of information that is tantamount to misinformation).

If Judge Koh didn't invalidate any of Apple's patents on JMOL, I would be concerned. While the slide-to-unlock patent is strategically irrelevant, ten European judges (some of which have engineering degrees, unlike U.S. judges) have found the European member of that patent family invalid, and the same prior art (including the Neononde N1m) is also mentioned in Samsung's JMOL motion. Judge Koh would be the first judge in the world to believe that Apple deserved a patent on a slide-to-unlock image when the basic concept of slide-to-unlock already existed long before the iPhone.

In its JMOL motion, Samsung is also trying to prevail on the other one of its own patents-in-suit (the '239 patent), and in the event Apple's liability win is affirmed by Judge Koh, Samsung is seeking a reduction of the damages award by $32 million.

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Saturday, May 24, 2014

Apple requests retrial of Samsung patent case, demonstrates dissatisfaction with jury verdict

After the original version of the Apple v. Samsung II jury verdict that came down on May 2 (and had to be amended on May 5), Apple's PR department had issued a premature statement that basically described the verdict as a win for Apple, though the result was a rather mixed one. Litigants can engage in spin-doctoring all the want, but what's usually more telling is what procedural steps they take after a decision. Do they want to leave a decision intact, or do they seek to have it overturned at all costs?

After the 2012 trial in the first Apple v. Samsung case, Apple was seeking some gradual improvements but more than anything else sought to defend the verdict, while Samsung wanted the jury to be overruled or, in the alternative, a retrial. A limited damages retrial resulted from Samsung's post-trial motions, but the parameters weren't really favorable to Samsung, so the retrial didn't change nearly as much as Samsung had hoped.

This time around, it's the opposite. Just like Apple in the first case, Samsung is still trying to obtain some improvements (due to sealing it's unclear what exactly it has requested), while Apple can't hide its dissatisfaction with this month's verdict: in addition to seeking additional liability findings in its favor from Judge Koh, a tripling of the largest part of the damages award, and a permanent injunction (in the previous post I just discussed that initiative), Apple has also moved, late on Friday by local time, for a complete damages retrial (this post continues below the document):

14-05-23 Apple Motion for JMOL and Retrial by Florian Mueller

In connection with Apple's pursuit of a higher damages figure, be it by tripling and/or a retrial, it's worth noting that Apple's damages claim relating to the '647 "quick links" patent was more than 20 times what Apple itself demanded from Motorola Mobility in a parallel case for the same patent, on a per-device basis. For reasons I explained in my previous post, the '647 claim construction from the "Posner case" was accepted by Apple last week when it brought a motion for a remand of a reexamination procedure jointly with the United States Patent and Trademark Office. Under that claim construction, the patent isn't nearly as valuable as Apple is claiming in the California Samsung case.

The part that proves Apple's disappointment with the outcome of the recent trial is where it argues that "Samsung's improper and prejudicial statements to the jury warrant a new trial on infringement for the '414 and '959 patents (in the event that the Court does not grant JMOL of infringement), a new trial on willfulness for all patents other than the '721 patent (and also other than the '647 patent if the Court grants JMOL of willfulness for that patent), and a new trial on damages for all five of Apple's asserted patents" (emphasis added).

Samsung could also make an argument that it was prejudiced. There was a controversial propaganda video that Judge Koh showed to the jury, though there would been a non-prejudicial alternative. The $2.2 billion damages claim was absolutely ridiculous, yet Judge Koh allowed Apple to present it to the jury, while not permitting Samsung to discuss with the jury the real-world evidence that the terms of Apple's license agreements with companies like HTC and Nokia (or Apple's 60-cents-per-unit damages claim from Motorola over the '647 patent) are. The jury basically had to arrive at its damages figure in a parallel universe in which everything was painted in a light way too favorable for Apple, not in the harsh light of reality, in which Apple's patents are far less valuable than the company claims. The jury wasn't told about the status of the reexamination of the '172 autocomplete patent and was generally misled about (in)validity issues.

But Apple thinks it could get a better damages award next time, and is pushing hard for a new trial.

As for Apple's argument that it was prejudiced, the points Apple makes aren't all wrong. It's just that they aren't extremely strong (while the hurdle for a new trial is reasonably high) and, on balance, if anyone was prejudiced, it was Samsung, not Apple, for the reasons I outlined before.

  • During the trial I already agreed with Apple that Judge Koh should have allowed it to make certain arguments with respect to its alleged non-practice of the patents-in-suit. However, to some extent this is a problem of "you make your bed and you lie in it": Apple made some procedural concessions relating to case narrowing only to go to trial as quickly as possible. This had a limiting effect: Apple then couldn't point to other claims from the asserted patents than the five claims-in-suit.

  • Apple argues that Samsung's "references to the possibility of a permanent injunction" were prejudicial because "the jury could have decided to reduce the damages it awarded to Apple or, even worse, the jury could have found no liability on certain patents as a way to reduce the impact of any injunction". I thought it was reasonable for Apple to request a curative instruction from the court, and the judge was very strict by not granting one. However, it's not likely that the jury's damages award was influenced by this in any way.

  • Apple furthermore believes Samsung should not have been allowed to tell the jury about the fact that the Federal Circuit had reversed a preliminary injunction over the Galaxy Nexus because this "unfairly suggested to the jury that an appeals court sided with Samsung and against Apple on an issue that was relevant in the current trial, when in fact the Federal Circuit's decision had no relevance to the issues that were before the jury". However, it was part of Apple's trial strategy to argue that Samsung had removed the universal search feature and then put it back because of customers complaining. The parties also had an argument over related user comments on a website. It is, however, an obviously important fact that Samsung put the feature back because the preliminary injunction was lifted.

Judge Koh is hardly going to order a new trial for those reasons. She may make some minor adjustments to the verdict, and then she'll let the parties appeal the unfavorable parts of the ruling to the Federal Circuit. Thereafter, there may be a retrial -- but in the meantime the parties will probably settle because this litigation has become a waste of resources.

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Apple seeking U.S. permanent injunction against Samsung based on this month's jury verdict

Surprise. Not. In a follow-up to this month's $119 million jury verdict in the Northern District of California, Apple filed a motion for a U.S. permanent injunction against Samsung late on Friday by local time. With respect to the three patents Samsung has been held to have infringed (one of them by summary judgment and two by the jury), Apple is asking Judge Lucy Koh to order a U.S. sales ban. The proposed injunction order would refer to the products at issue in the recent trial but would relate to any "software or code capable of implementing any Infringing Feature, and/or any feature not more than colorably different therefrom", including software or code found in newer (even future) devices.

Apple's track record with U.S. injunction motions against Samsung does not suggest that an injunction will issue, or that it would be upheld by the appeals court should Judge Koh suddenly lower her standard for injunctive relief. Apple's motion is sealed, but the evidence it presented at trial for the competitive harm it is allegedly suffering from Samsung's infringement has largely the same shortcomings based on which Judge Koh, in March, denied a permanent injunction in the earlier-filed California case. Even if an injunction of some sort ultimately entered into force, Samsung would be able to work around the relevant patent claims and its products would be just as attractive to consumers as before. (In fact, Apple has a U.S. import ban in place against Samsung, over two patents including the "Steve Jobs patent", and it has no commercial effect due to a workaround that the ITC had cleared.)

The key piece of evidence based on which the Federal Circuit gave Apple a second chance to persuade Judge Koh to grant an injunction was a conjoint survey (an attempt to identify what price premiums consumers are willing to pay for particular features in multifunctional products) by Apple's expert witness Dr. Hauser. But Judge Koh found that his study fell far short of proving irreparable harm. She held that the survey "measure[d] the market demand for the patented features in a vacuum, without relation to the actual price or value of the devices"; she found that "numerous features that were not tested--such as battery life, MP3 player functionality, operating system, text messaging options, GPS, and processor speed--are highly important to consumers"; in her view, the study also "appear[ed] to have failed to adequately account for noninfringing alternatives to the patented features"; and additionally, the study was tainted by the fact that the relevant features were overemphasized and consumers received more information about those features than average smartphone buyers have.

I was way too optimistic for Apple's ability to obtain an injunction. Judge Koh's decision to deny an injunction once again, which makes a whole lot of sense to me now (wiser after the event), was the only one of the six most important smartphone IP decisions in the first half of 2014 on which I was wrong. (Well, five out of six ain't bad.)

The same MIT marketing professor did another study, with largely the same methodology, for Apple in connection with this second California case. While Apple argues that he has now established a more direct connection between the relevant features and demand, I don't think Judge Koh can order an injunction this time around without being inconsistent with her decision in the first case. The price premiums Dr. Hauser arrived at this time were so clearly unrealistic -- far more than in the first case -- that Judge Koh is still going to be concerned about "relation to the actual price or value of the devices". It's easy to see that something was wrong with that study when the results were just crazy. While juries don't decide on injunction requests, the fact that the California jury fundamentally disagreed with Dr. Hauser's findings is yet another indication of how unreliable that conjoint survey was. Those were basically consumers who live in Apple's backyard, and they didn't buy the Hauser results.

In my view, the biggest problem with the Hauser conjoint survey is that consumers were asked to respond based on the value of features that the patent claims-in-suit don't actually monopolize. Judge Koh's concern in the first case about a failure to "adequately account for noninfringing alternatives to the patented features" must be an even greater one in the second case. Here, Apple didn't even claim that its own current products implemented the autocomplete patent claim-in-suit. Even Apple didn't accuse newer Samsung products of infringing the slide-to-unlock patent, and the jury cleared certain accused products of infringing that one.

For the '647 "quick links" patent, the procedural situation is a bit complicated. The Federal Circuit affirmed Judge Posner's claim construction. As a result, the patent was defanged and devalued because Judge Posner himself had already explained in 2012 how it can be worked around based on his interpretation. For complex procedural reasons, Apple might somehow try to still have the patent interpreted more broadly, but would hardly succeed if it tried. Ahead of a deadline for filing petitions for rehearing, Apple and Google jointly asked the Federal Circuit to dismiss the Posner cross-appeal under an agreement between them to withdraw all pending lawsuits against each other worldwide. I would have liked to see Google further appeal the "Posner case", not with respect to the '647 patent (on which the panel was unanimous) but some overarching issues. Instead, the Federal Circuit has now granted the motion, dismissed the appeal, and remanded the case to the Northern District of Illinois, where Apple and Google will get the whole case dismissed now. So in a strictly formal sense, neither Judge Posner's claim construction nor its affirmance by the Federal Circuit are precedential. However, it's really hard to see that Judge Koh or the Federal Circuit would arrive at a different claim construction in the future. And Apple itself accepted that construction on May 14 when it moved, jointly with the United States Patent and Trademark Office (USPTO), for a remand of the reexamination of the broadest '647 claims. The motion says that the USPTO and Apple "parties recently conferred and agree that the case should be remanded to the Patent Trial and Appeal Board (Board) for reconsideration of the rejected claims in light of this Court's construction of 'linking actions' in [the 'Posner case']". The remand motion was brought only two days before the Apple-Google motion to dismiss the "Posner appeal".

Before Judge Koh can rule on Apple's injunction request, she will probably have to adjudicate Samsung's motion for judgment as a matter of law (JMOL). Samsung brought that motion late on Friday as well. It's sealed, but it's possible that Samsung is asking the court to overrule the jury with respect to some or all of its liability findings.

Apple has attached to its sealed injunction motion some media reports that quote Samsung's lead trial counsel, John Quinn, such as this CNET article by Shara Tibken and this Mercury News article by Howard Mintz. The selection of articles suggests that Apple wants to get mileage out of the fact that Samsung's lawyer says Apple hasn't really gained any leverage through all of this litigation and hasn't been able to enforce any remedies (neither has any cent of those damages awards been paid so far nor has Apple obtained a permanent injunction). I doubt that Judge Koh, who most likely read those reports anyway, will be impressed by this: it's Apple's problem that its patents aren't strong enough to win, not the court's problem. Apple may have attached those reports mostly for the appeals court to see them, hoping that the Federal Circuit would then be concerned about the absence of forceful remedies.

Apple will also face a reasonably steep challenge at the appeals court, which previously established a fairly high "causal nexus" standard that patent holders must satisfy in order to obtain injunctive relief. Circuit Judge Sharon Prost, who has played a key role in the push for the "causal nexus" requirement, will succeed patent holder-friendly Chief Judge Rader at the end of this month. Her dissent in the "Posner case" was absolutely great. Judge Prost has a much more balanced approach to intellectual property than Judge Rader. Judge Rader's knowledge of patent law is unsurpassed, and he has taken some very good positions on issues such as damages, but I was shocked when he labeled the USPTO's patent trial and appeals boards (PTAB) "death squads" that kill patents: those patents aren't "killed" but simply should never have been granted in the first place. Even as the future chief judge, Judge Prost will have only one vote on a panel, but her opinions and statements will now get far more attention. Again, I recommend strongly to read her dissent in the "Posner case". She's great, but her statutory promotion is not great news for Apple.

Finally, I'd like to mention that a Dutch appeals court upheld an injunction Apple had won against Samsung (originally as a preliminary injunction back in the summer of 2011, which was then turned into a permanent one) in the Netherlands, over a photo gallery-related member of the rubberbanding patent family, EP2059868 on a "portable electronic device for photo management". As I already explained last month, rubberbanding is the only feature (that consumers would really be able to identify and describe as a feature) Apple has been able to require Google and its device maker partners to remove from Android products. The affirmance of the photo gallery rubberbanding injunction is a symbolic victory for Apple that doesn't make any difference whatsoever in the marketplace. In 2011 Samsung was granted a grace period of about six weeks to modify its products so as to steer clear of further infringement, and it has been doing fine ever since. The best news in this for Apple is actually that the patent was not invalidated in the Netherlands. HTC also failed to get it invalidated in the UK (but due to a settlement with Apple, HTC did not pursue this invalidation request on appeal), while the Federal Patent Court of Germany agreed with Samsung and Google's Motorola in September 2013 that the patent was invalid (a decision that Apple has presumably appealed to the Federal Court of Justice).

[Update] On Saturday, Apple made a public redacted version of its injunction motion available:

14-05-24 Public Version of Apple Motion for Permanent Injunction Against Samsung by Florian Mueller


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Tuesday, May 20, 2014

U.S. patent reform movement lacks strategic leadership, fails to leverage the Internet

Approximately ten years ago I became an anti-software patent activist. I ran a Europe-wide campaign in 17 languages (not the first one in Europe to advocate the abolition of software patents, but it was forceful enough for me to win the European Campaigner of the Year award from the Economist Group that went to Austrian-born Governor Schwarzenegger two years later). Meanwhile I've done my first couple of patent filings and intend to do more, and there's no way I would return to anti-patent campaigning (I was already done with that in 2006). I do, however, believe that some serious reform is needed in the U.S., and in Europe there's a risk of very negative side effects of what would be a good thing per se (a more unified and less expensive European patent system). In this post I want to share my observations on why the U.S. patent reform effort is apparently on the verge of defeat (though these things can sometimes change overnight in politics).

[Update on May 21] Sen. Leahy, whose commitment to reform is questionable, has taken the reform bill off the Senate Judiciary Committee agenda, at least for now. [/Update]

When my brothers in arms and I were fighting the patent establishment in Europe, Twitter didn't exist, nor did anyone outside of Harvard University know Facebook. We used mailing lists and Wikis, and to a lesser degree conventional discussion forums, for communication and coordination. Even with those limited tools, we were able to build serious pressure on EU policy-makers over the Internet. Many websites had anti-software-patent banners, some on an ongoing basis, others just during "web demos" ahead of key decisions.

There was a Europe-wide community of anti-software-patent activists. A few of its members were active on a daily basis, and others just from time to time. There was a grassroots network that was able to mobilize people very quickly and effectively to take action -- and a pretty significant number of them were small business owners, who obviously had less time available for this effort than students but were more important to politicians. I'm not aware of anything like that in the U.S., where there's no shortage of professionally-designed websites by lobby groups (all of which look more or less the same) -- in that regard, we had some shortcomings -- but there is no community of activists. Just a bunch of lobbying entities.

As long as it's using the very same tools as its opponents, the U.S. patent reform movement should not be surprised about the current stalemate. The pro-patent camp also has money to spend on web designers and lobbyists. It may have even more money available because the pro-patent camp has a more centralized structure. So what you get is a bunch of lobby group websites that all look very similar.

Ten years ago, large companies like Google were unwilling to lend any financial support to critics of the patent system. Nowadays, companies like Google, Facebook and Twitter, but even certain hardware makers such as Cisco, pour money into patent reform initiatives. But they won't be able to solve the problem by trying to outspend those who oppose meaningful reform. They won't win unless they realize that the most valuable currency in politics is not money: at the end of the day it's all about voters.

Many victims of patent trolling have indeed contacted U.S. politicians. And this has had an effect, which is noticeable when politicians speak at hearings. But you can get only so far with advocacy. There will be politicians, such as apparently certain Senate Democrats, who are beholden to the patent system and/or large corporations supporting it. There's no way you can convince them because they don't even want to understand what's wrong with the system. They are beholden to trial lawyers and certain corporations.

That's where more of the same won't help. It's where you have to become truly combative and play hardball in order to break the resistance. And to do that, you must fight both smart and hard. Your movement must also be effective as a pressure group to bring about serious change. Once you've figured out a politician will never be on your side, you must make him or her pay a political price for it. You want his party base to be so outraged that he or she will worry about this having a potential effect on the next primary or general election. Obviously, patent policy is not the kind of subject that can decide an election at any level on its own. But it can be one of various factors, and a very vocal group that can mobilize its supporters effectively will appear stronger than it may be in numbers.

The U.S. patent reform effort is too conventional, too predictable, too unimaginative. It's playing the game by rules that favor its opponents instead of changing the rules and bringing to bear its strength, which is that there's a far greater number of people who are unhappy with the state of the patent system than people who would actively support it.

The pressure group that started the European fight against software patents, the Foundation for a Free Information Infrastructure (FFII), sometimes stepped over the line, but overshooting a little bit occasionally is better than running an anemic, stolid campaign like the push for U.S. patent reform. The FFII attacked politicians who were firmly on the other side. It maintained Wiki pages on which it documented the pro-software-patent activities and statements by those politicians. It published and dissected statements, speeches, and letters those politicians sent to voters, just to explain to people what those politicians really said and did. This really had politicians concerned. Many politicians and their staffers kept track of what the FFII wrote about them, and sometimes even called up the FFII to request edits. Those politicians (and their staffers) were concerned that this information could influence the way that their peers, journalists, friends, neighbors, and especially their voters viewed them.

Apparently the U.S. patent reform movement knows very well who the obstructors of reform are. But it's not enough to put the blame on unnamed Senate Democrats. You have to name and shame them. You have to publish and dissect their statements and explain how those politicians harm Main Street businesses and consumers. You have to show how they act against the public interest only because it means more money in the trial lawyers' pockets. You have to expose them as the friends of patent trolls that they are. You won't convince them that way, but they may proceed with greater caution and, ideally, at some point give up their resistance to reform because they realize the price is too high.

In politics, the enemy of your enemy is your friend. In Europe, we had entrepreneurs as well as Attac activists. In the U.S., the patent reform movement should think about who the enemies of their enemies -- the Senate Democrats who oppose reform -- are. For example, many of the people who promote patent reform may be left of the political center, but the small business owners who are affected by patent trolling are usually not. In any event, if certain Senate Democrats oppose the public interest in patent reform, why doesn't the patent reform movement find a way to get, for example, Rush Limbaugh and his relatively new Young Conservatives website to talk about it? Or Glenn Beck? They reach large audiences. It may be possible to get them interested in a story of Senate Democrats acting against Main Street interests, especially if there is some well-researched material available on the Internet that exposes the friends of the trolls.

Obviously, the kinds of conventional lobby groups that are members of the Main Street Patents Coalition, such as the American Hotel & Lodging Association or the National Association of Federal Credit Unions, can't play the name-and-shame game. Even the Electronic Frontier Foundation, though some of its positions on IP are very extreme, wouldn't want to do that. Those kinds of groups need to maintain good relations with politicians all the time. And patent reform, while important, is only one of many things they're interested in, so they can't burn bridges.

That said, those traditional lobby groups could lend logistical and, if structured intelligently, also financial support to activists who are willing to spend time on this, whose exclusive political focus would be on patent reform and who would be willing to break the rules of D.C. lobbying in order to win.

Without financial support from the likes of Google, Cisco and Facebook, we broke pretty much all the rules of Brussels lobbying, and while we didn't achieve the abolition of software patents in Europe (they continue to be granted and enforced on a daily basis), we created a situation in which both camps agreed that it was best to have no new EU-wide law on software patentability. For the first and I believe still the only time in EU history, the European Parliament threw out a bill at a second reading, i.e., without any negotiations with the EU Council (the other legislative body in the EU). Against the rules, we made EU history.

I can't imagine that it wouldn't be possible to form such an activist community in the U.S., especially with the dynamics of today's social media. There are many people out there who would love to make a contribution to patent reform. There should be an online community that they can join, and which will organize online campaigns as well as local meetings. A place where they can exchange ideas and educate themselves.

The European anti-software patent movement consisted not only but to quite some extent of free and open source software activists. Many of them came across as overly ideological, but there were also academics and small business owners. Discussions were sometimes difficult, but usually fruitful. It should be possible to have similar dynamics in the U.S. as well.

All volunteer organizations face one fundamental problem: there will always be more people who want to offer their views than people who want to do the grunt work. But if a community is large enough, and if it has great leadership, then it can get a lot done.

Run-of-the-mill lobbying and grassroots activism can be a powerful combination. Sometimes grassroots activism is created organically, such as in Europe. But companies with a strategic interest in connection with a key policy issue can also find and (indirectly) support individuals who have the skills and the energy to create and organize such a movement.

If the U.S. patent reform movement had first-rate strategic leadership, then its leaders would have studied in detail how European anti-software patent activists achieved a historic rejection of a legislative proposal. They would also have tried to learn as much as possible from the recent legislative process in New Zealand. Of course, America is different. The topics are also different: in the U.S. the reform movement is too cowardly to speak out against software patents at the level of subject matter (admittedly this is harder to do in the U.S. than elsewhere, but the positions of the U.S. reform movement are way too soft to begin with and then get diluted in the political process, which is why nothing meaningful is achieved in the end). So the U.S. patent reform movement just uses trolls as a pretext for litigation reform, while the political processes in Europe and New Zealand were about patent-eligible subject matter. There's also a fundamental difference between the U.S. two-party system and the multi-party EU landscape. Still, if the masterminds of the U.S. patent reform initiative had been serious about winning, they would have done some thorough research on what worked and what didn't work elsewhere, in order to then determine which of those lessons learned abroad would also help them in their country. It's quite clear that they didn't do that. All they came up with was the very same kind of D.C. lobbying that the supporters of the current state of the patent system can also do (and possibly do even better). Apparently this isn't working.

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Apple, Samsung lawyers blame each other for failure to settle patent dispute: court filing

On Monday, the Korea Times, citing unnamed sources "directly involved with the matter", reported that "Samsung has recently resumed working-level discussions with Apple and the key issue is how to dismiss all lawsuits". The sources also recognized that "[s]ome more time will be needed to fix terms of details such as royalty payments in return for using patents owned by each before reaching a full agreement". But the goal is apparently to agree on a ceasefire comparable to the truce Apple and Google (Motorola) announced on Friday, which does not shield Google's hardware partners, such as Samsung, from Apple's patent assertions (and does not even shield Google itself from the Rockstar lawsuits).

Later on Monday, a joint court filing by Apple and Samsung informed Judge Lucy Koh of the status of the parties' Alternative Dispute Resolution (ADR, i.e., mediation) efforts. After the recent verdict, Judge Koh had asked the parties to make another attempt to settle their patent spat and requested information on the status of those efforts.

It's key to bear in mind that the parties' court filing, including the attached correspondence between counsel that was apparently written for no other purpose than the blame game that is now taking place in front of the judge, relates only to ADR with the help of a mediator (which the parties tried before, more than once in fact). This is separate from the working-level discussions the Korea Times reported on. Working-level discussions can take place anytime, but the parties wouldn't tell the judge about those informal talks. Judge Koh wants them to make another formal mediation effort. And so far they can't agree on that one. But they are probably talking nonetheless, just not in a formal ADR setting. They can settle without ADR.

Apple wants assurances that its participation in an ADR effort wouldn't be held against it in court (as evidence of its willingness to license), while Samsung would be available for ADR "without seeking to impose any comparable conditions upon Apple". Samsung notes that "Apple has repeatedly used its prelitigation meetings with Samsung during trial to support its arguments".

Samsung's letter exudes confidence. In response to claims by Apple that Samsung "has now lost three jury trials and an ITC proceeding", Samsung's counsel highlights that Apple has also been found to infringe a Samsung patent, that "each verdict was far less than the amounts sought by Apple", and sums it all up by saying that "Apple has nothing to show for its years of litigation and hundreds of millions of dollars spent on attorneys' fees" -- which is true if you consider that the only feature (that end users would recognize and define as a feature) Apple has proved to own is rubberbanding.

Apple points to statements by Samsung's lead counsel in the recent trial, John Quinn, to the media. I quoted some of those statements in a recent post in which I outlined three possible ways forward for Apple ("the good, the bad and the ugly"). I'm sure Apple is genuinely outraged because Mr. Quinn brought up a painful subject: remedies. Apple hasn't been able to enforce any remedies against Samsung yet in connection with the trials that have been held in the U.S., and while Samsung exaggerates when it claims that Apple will get nothing at all in the end, I think it is realistic to expect significant reductions of those damages awards on appeal (and the award from the first case probably won't be able to stand because yet another trial will be needed if any key liability finding falls, which the one over the '915 pinch-to-zoom API patent very probably will). I do, however, agree with Apple that the "jihadist" statement was over the top.

Apple's part of the joint submission repeats the usual allegation of Samsung being unrepentant infringers, interpreting Mr. Quinn's statements to the media as an indication that "Samsung has no interest in stopping its use of Apple's patents or compensating Apple for past infringement" and alleging that "Samsung has adopted a business model that prohibits early or even timely resolution of any dispute involving intellectual property infringement".

I have said before that Apple is entitled to compensation for past design patent infringement. But as far as Apple's utility (i.e., technical) patents are concerned, it's increasingly unlikely that Samsung will ever pay any noteworthy amount of money for those. Further above I quoted Apple's statement that Samsung had "lost [...] an ITC proceeding". That is true only in formal terms, but from a business point of view, Samsung won the ITC case over Apple's complaint because the ITC cleared Samsung's workarounds. The import ban has been in force since October without any business impact (most people just don't know because there was lots of media coverage when the ruling came down, but no follow-up on the fact that end users don't even notice any change as a result of Samsung's ITC-approved workaround). If even the so-called "Steve Jobs patent" doesn't have impact, isn't it about time that Apple looked for an exit strategy from a war it apparently can't win?

For a long time I believed that Apple's primary problem was that the process (including appeals) is slow. Until August or September of last year, there were reasons to believe that Apple would get some decisive leverage. An appellate hearing on injunctive relief appeared to have gone well for Apple, the U.S. import ban had been ordered (and its impactlessness wasn't clear until it took effect in a legal sense but had no commercial effect), a German court appeared inclined to support Apple's "copying" allegation. But none of that worked out for Apple later. And while the patents Apple is asserting in the case that went to trial this year appeared stronger than the ones at issue in the first case, the patent claims Apple ultimately took to trial weren't frightening: Apple did not even claim to practice three of those five claims in its current products, which shows that one can deliver certain features without infringing on those patent claims. Apple's out-of-this-world damages claim in the second trial was a sign of despair more than anything else.

I still believe, as I told the Korea Times on Monday, that an Apple-Samsung settlement is now more likely than ever, and I would be surprised if this pointless litigation continued beyond the summer. "Boy have we patented it" was probably the biggest error, by far and away, of Steve Jobs's second tenure as CEO of Apple. If his successor hadn't realized it, he wouldn't have agreed on a ceasefire with Google.

Here's the joint Apple-Samsung court filing on ADR:

14-05-19 Apple-Samsung Joint Submission on ADR by Florian Mueller

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Saturday, May 17, 2014

Apple truce shows Google's Motorola deal was neither substitute nor antidote for Nortel patents

I've already commented on the second-class settlement (dismissal of lawsuits but not a license covering Android) Apple and Google have entered into from a position of mutual weakness. It's only about direct litigation between the two. Apple v. Samsung, another dispute that should also settle sooner rather than later because Apple's patents aren't "thermonuclear", will continue, for the time being. And so will the Rockstar Consortium's lawsuits against Android device makers. In this follow-up post I want to focus on the oddity that the Nortel patents Google originally wanted to buy are still being asserted against Android while Google has given up its original hope of forcing Apple (and others, but let's focus on Apple now and talk about others on different occasions) into cross-license agreements protecting Android on a global basis.

The Nortel patent portfolio went to the Rockstar Consortium -- consisting at the time of Apple, BlackBerry (then called RIM), EMC (which left after the deal), Ericsson, Microsoft and Sony -- for $4.5 billion after Google decided not to raise its last bid of $4.4 billion beyond that price point. That was on June 30, 2011. Google had won the "stalking-horse bid", but that one was not for real. When things were for real, its rivals had won. Interestingly, those rivals included two companies with a vested interest in Android at the time (Sony and Ericsson, through their joint venture, which now belongs to Sony alone).

Google's plan was to use Nortel's patents the way it later tried to leverage Motorola's. Had it won the Nortel auction, it might have tried (though regulators could have obligated it do to this early on) to dispute that it had to honor Nortel's existing license agreements and, especially, FRAND licensing commitments since it would have bought those patents out of a bankruptcy estate as opposed to acquiring a company with contractual and contract-like obligations in force and effect. In that regard, the Nortel portfolio would have had Google's rivals more concerned. That's why they teamed up and cleared the market of this patent arsenal.

At a time when it was not clear that, years later, not a single patent held by anyone on this planet would have proved to be an "Android killer patent", and when OEMs were increasingly concerned that Google wasn't doing enough to defend Android, the lost Nortel bid was an even greater disappointment for Google. It knew there wasn't going to be a Nortel-like opportunity on the market, but it felt an urge to do something.

The way Google's talks with Motorola Mobility went was later documented in certain SEC filings. Not long after the failed Nortel bid, Google approached Motorola Mobility with the plan to buy its patents. It turned out early on that it had to buy the entire company because Motorola Mobility would not have been able to defend itself anymore without its patents. It knew it couldn't be a viable device maker without those patents.

There were two problems with the need for Google to buy the whole enchilada. Price was one problem (though in retrospect the net price of the patents involved was "only" of a Nortel magnitude, given that Motorola had cash in the bank, tax deductions, and that Google sold almost all of Motorola's operating business, firstly the set-top box business and then the handset business, for reasonably good prices). The other problem was that Google would rather have avoided competing with other device makers.

Presumably there was some hesitation on Google's part for those reasons. But Google needed to act, and when Motorola Mobility started to imply in public that it might use its patents against other Android device makers, the $12.5 billion deal materialized a few days later.

Motorola's patents clearly didn't prove thermonuclear. Google was limited in its enforcement of FRAND-pledged standard-essential patents (SEPs) for antitrust and contractual reasons. Motorola's non-SEPs never had any serious impact, except that Motorola was able to enforce a synchronization patent against the email service of Apple's iCloud in Germany for 19 months. Late last year, the patent was invalidated for the most part and upheld only in a much narrower form that wasn't going to be of concern to Apple anymore (though the narrowed version might have been good enough for Google to argue that there weren't any substantial wrongful-enforcement damages). To Google's lawyers' (i.e., Quinn Emanuel's) credit, with only one Motorola patent being challenged in the Federal Patent Court of Germany, they have salvaged in that forum the same number of patents in a narrowed form as Samsung (so far) and Microsoft have with substantially larger numbers of patents-in-suit in Germany. Still, Motorola's portfolio didn't result in global cross-license agreements covering Android as a whole.

While Google has given up on forcing Apple to drop all current Android lawsuits and to preclude it from bringing any new ones, the Nortel patents it originally wanted to buy are still being asserted against several Android OEMs, including the largest one, Samsung. Apple, which contributed more than half of the Rockstar Consortium's funding, is still suing Google and its partners through Rockstar, despite yesterday's deal.

On Thursday, Judge Rodney Gilstrap in the Eastern District of Texas, who in 2013 was assigned 941 patent infringement suits, more than double his nearest colleague, and recently declined to rule on whether Apple's app developers were covered by an Apple license deal with Intellectual Ventures, denied motions by Samsung and other Android OEMs to dismiss Rockstar's Texas lawsuits for lack of standing (and to throw out one patent for alleged invalidity due to patent-ineligible subject matter). Previously, a federal judge in California had denied a Rockstar motion to transfer a declaratory judgment action by Google to Texas. The venue fight isn't over yet, and I wouldn't be surprised to see one or more petitions for writ of mandamus to the Fedreal Circuit.

The California decision was based in part on a finding that Rockstar's scare tactics against Android advanced Apple's interests and that Apple, due to the size of its investment in Rockstar, was also going to benefit from a potential license deal (the decision didn't mention a particular endgame scneario).

But I doubted that Apple was really behind Rockstar's infringement actions against Google, its OEMs, and non-Android parties like cable networks using Cisco products. The structure of the Apple-Google truce now reaffirms my belief that Apple does not control Rockstar and, most probably, does not even have a veto right against litigation by Rockstar if other shareholders want litigation to go ahead.

I'm convinced that Google would have insisted on a withdrawal of Rockstar's lawsuit against Google itself (over search engine-related patents) and on a dismissal of Google from the Rockstar v. Samsung lawsuit in Texas if Apple had the power to stop Rockstar's litigation campaign. But with Apple not being (and probably never having been) able to prevent Rockstar from suing Google and its Android partners, all that Apple can do is drop its own direct lawsuits against Google's Motorola Mobility subsidiary.

So let's not blame Apple for the Rockstar situation unless and until there is ever any hard evidence of Apple having been a "hawkish" Rockstar shareholder. I believe, though I can't prove it, that Apple just wanted to clear the market of those patents and to acquire some SEPs to bolster its own portfolio, but never wanted Rockstar to go out and sue others.

Google's defensive efforst against Rockstar (through the declaratory judgment case in California) and its recent intervention in multiple Nokia v. HTC actions in the U.S. and Germany (that dispute was settled in February) show what Google will now have to increasingly focus on. Mutually assured destruction didn't work out. That's fine because mutually assured non-destruction is an even better outcome for Google, but its device maker partners will increasingly expect Google to pick up legal fees (as it did in connection with the recent Apple v. Samsung II trial), to intervene, to bring declaratory judgment cases, and to file reexamination requests or nullity (invalidation) complaints against patents that others have used, are using or might use against Android. For example, after the Nokia-HTC settlement I believe Google should still make some effort to strike down some Nokia software patents that were asserted against Android (especially in light of the bifurcation problem in Germany, where there is a risk of patents that should never have been granted in the first place being enforced, through injunctions, before an invalidity decision comes down). Motorola's patent portfolio didn't have teeth, but Google can and must do much more than in the past to defang certain rivals' patent portfolios so as to protect the Android ecosystem.

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Friday, May 16, 2014

Apple, Google dismiss patent suits against each other, settle from position of mutual weakness

On Friday, Apple and Google's Motorola filed a joint motion with the Federal Circuit to dimiss the "Posner cross-appeal", in which an appellate opinion came down late last month and the deadline for petitions for rehearing was approaching, asking for a mandate to the district court so they can move for dismissal on remand (this post continues below the document):

14-05-16 Apple-Motorola Joint Motion to Dismiss Appeal by Florian Mueller

Reuters quotes an official statement according to which they have not agreed on a license, but they have agreed to withdraw all litigation pending directly between them (which does not include the Apple v. Samsung dispute), and to work together in some unspecified areas of patent reform (presumably trolls, which plague both companies). The dispute had started in October 2010.

While a mere dismissal of lawsuits without a cross-license is only a second-class settlement, let us nonetheless congratulate both companies on this decision, which makes a whole lot of sense and is another step toward sanity concerning patent litigation. Here's my quick take:

The parties have entered into a second-class settlement from a position of mutual weakness. They had to recognize that under the procedural circumstances their patents were not strong enough to give either party decisive leverage over the other, at least not anytime soon.

Ever since Google announced the $12.5 billion Motorola Mobility deal in August 2011, which was meant to be a patent purchase more than anything else, I have commented very skeptically (to say the least) on the strength of that patent portfolio. The deal has not given Google leverage; if it has had any impact, it got Google into antitrust trouble, which at the end of the day also turned out to be pretty inconsequential as Motorola was not fined in any jurisdiction.

I doubted from the beginning that Google could use Motorola Mobility's patents the way it thought back in 2011 it could leverage them: to assert them against major rivals suing Android device makers in order to force a global patent cross-license agreement that would protect all Android OEMs. By dismissing its lawsuits against Apple without a license deal that would also cover third-party Android device makers (such as Samsung, but also dozens of smaller ones), Google has now effectively recognized the failure of the original plan that was all about mutually assured destruction. It's only a matter of time, and possibly very little time, until Google will also withdraw its patent assertions against Microsoft (a company much less likely to be affected by Motorola's patents because the mobile devices business it just acquired from Nokia has a license deal in place with Motorola).

Even though Google's original summer 2011 plan has now officially failed, Google as a company and Android as a platform and ecosystem are winners: since Apple's patents proved to be anything but thermonuclear (at least so far, and with no signs of this changing), the overall outcome between Apple and Android is mutually assured non-destruction. This is a perfect outcome for Android, and Google was able to afford the Motorola deal anyway, even though we all know now that Google way overpaid.

In more than 50 months of patent infringement lawsuits against Android device makers, Apple has not proved its ownership of any feature (in terms of a feature that end users would define as a feature, as opposed to secondary aspects of features) other than rubberbanding. The overscroll bounceback is the only recognizable feature that had to be removed from Android devices as a result of Apple's lawsuits. Google and its device maker partners have been able to work around Apple's patents in ways that don't materially adversely affect demand.

Apart from the limited strength of Apple's portfolio, there is another reason for which Apple would only have wasted time and money by further pursuing the Motorola lawsuis. Google recently entered into an agreement under which Lenovo acquired Motorola Mobility's handset business. Even if Apple had won something against Motorola in the future (for example, a Florida trial was scheduled to take place later this year), it would not have had direct impact on Google's business. By contrast, Google could have continued to use Motorola Mobility's patents against Apple, but those turned out too weak anyway.

What's unclear is whether the agreement to dismiss all pending litigation also involves a covenant not to sue for some time. The joint motion I published further above says that they will move to "dismiss the litigation without prejudice", meaning that technically they could reassert. Presumably their agreement precludes them from bringing new assertions against each other for a certain period of time. This means that Android-related patent assertions by Apple against Google itself are not going to happen too soon, if ever.

At first sight one would assume that this Apple-Google agreement makes a near-term Apple-Samsung settlement much more likely, but this depends on whether Apple's decision-makers have fully realized just how non-thermonuclear their patent portfolio is. If the decision to dismiss all Google lawsuits was primarily driven by Google's Lenovo deal, then Apple may still have unrealistic expectations with respect to the terms of a settlement with Samsung. Apple's 2012 settlement with HTC, which unlike the Google agreement did involve a cross-license (for ten years, in fact), was apparently also driven by the fact that HTC was no longer a priority target, and that settlement changed nothing about Apple's Android-related lawsuits against Samsung and Motorola. If Apple now just decided that Lenovo wasn't worth suing, then this may mean even more of a focus on Samsung -- but I'm reasonably optimistic that Apple is smart enough to know that Steve Jobs was wrong when he thought he could destroy Android with patents. I recently outlined three possible approaches for Apple after the recent Samsung verdict ("the good, the bad and the ugly").

As for patent reform, we'll see what positions Apple will take and what kinds of initiatives it will support. I don't like Apple's participation in an effort to discourage impactful patent litigation reform. Apple won't be able to strengthen its portfolio through lobbying. As the primary target of patent troll lawsuit, Apple should take reasonably reform-friendly positions. It should also do so because that would be the best it can do in the political arena for a constituency that matters to its business: app developers.

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