Tuesday, March 31, 2015

In post-Alice world, weaker software copyright would harm the U.S. economy: Oracle v. Google

The three branches of the U.S. government--legislative, executive, judiciary--have all become aware in recent years of the negative effects of overprotection of software-related intellectual property. When too much leverage is given to right holders (especially those whose patents are dubious), IP becomes a substitute for innovation, and a threat to true innovators. All three branches have taken initiatives to curb (software) patent abuse. The Supreme Court doesn't take initiatives per se because it just interprets the law, but it has heard more patent cases recently than in the past and almost all of the time its rulings have benefited defendants. This time around it appears that a Republican-led Congress will get things done; the Obama Administration, the future leader of Senate Democrats (Sen. Schumer from New York), Sen. McCaskill from Missouri and some other Democratic politicians will gladly support meaningful reform.

Concerns will continue to be expressed by certain stakeholders and their political allies. None of the reform measures discussed in Congress appears inherently overreaching to me. However, I want to make a point here that I believe the decision makers in the White House and the Department of Justice (and maybe even the Supreme Court) might consider:

With all that is going on in connection with software patents, this is the worst time one could pick for destabilizing the software copyright system. The good fight against overprotection, coupled with unnecessary uncertainty surrounding the IP regime that even the reasonable ones among the critics of software patentability support, could result in underprotection and, even before any decision is reached or (if a SCOTUS ruling raised even half as many questions as the Alice decision has) its effects become clearer, discourage investment in software innovation.

Sometime this spring (presumably), the Solicitor General of the United States, Donald Verrilli, will respond to the Supreme Court's request for input on whether Google's petition for a Supreme Court review of Oracle's appellate victory raises a question of law that it is in the public interest to address. With a little help from long-standing friends who orchestrated an amicus brief campaign, Google has apparently been able to position its petition as one that is not necessarily irrelevant, yet it has not convinced the court that this is a must-hear issue.

Different commentators have taken different perspectives on how much Google has accomplished so far, and -- surprise, surprise -- their opinions (including the one I expressed in January) are all consistent with who they believe to be right on the merits. The merits, of course, are not really a factor for the Supreme Court to consider at this stage. It's all about "to hear or not to hear."

We just don't know two very important things:

  1. To what extent has the Supreme Court analyzed Google's legal argument so far? (Circuit split etc.)

  2. What position will the government take? (The Supreme Court won't necessarily follow it anyway, but it wouldn't have asked if it didn't care.)

One can only speculate about the first question and make a more or less educated guess about the second point.

Everybody who is interested in software IP issues knows that non-technical people face particular difficulties in figuring them out. The Supreme Court can do this if necessary. But it doesn't have to make the related effort at the very beginning. So far it appears to feel that Google's (and its friends') claim that this is a key issue isn't facially implausible (a copyright expert has explained very well why there is no circuit split but Google can obviously afford lawyers who will make pretty much anything appear plausible at first sight). So the court decided to ask the administration for input to see whether those amici are really representative of the software industry (which they are not, but with Oracle's supporters having remained silent after the Federal Circuit ruling, that's easier for industry insiders than for a court to see).

The less time the Supreme Court spent time analyzing the details and intricacies of the underlying issue (because the amicus briefs suggested there could be an industry-wide concern), the less meaningful Google's achievement is. Considering how many cert petitions the SCOTUS has to decide on at any given point in time, one may or (as I do) may not believe that an incredibly deep analysis of such questions as whether declaring code is more or less functional than other program code has occurred so far.

As for the second question, I would be thoroughly surprised if the Department of Justice determined that Google's agenda in this context is in the interest of the United States. A week and a half ago I quoted from and linked to a Wall Street Journal article that highlighted the particularly close and cordial relationship between the Obama Administration and Google. But even friends can't ask for all sorts of favors. I absolutely cannot imagine that the DoJ would support Google's petition in the Android-Java copyright case. Whether one focuses on the broad scope of the petition (Google wants the SCOTUS to hold lots of software code, not just API-related declaring code, uncopyrightable) or on the narrower business objective of weakening copyright in API-related declaring code: what Google wants is terrible for the U.S. software industry, and bad for the U.S. economy at large given that software is such a key driver of growth.

Eight of the ten largest software companies according to Wikipedia are U.S. corporations. The only non-U.S. company among the top nine, SAP, is formally headquartered in Germany but has Silicon Valley operations that go far beond the role of a local subsidiary of the "sales, marketing and support" kind.

A different list, which I found on Investopedia, defines "software company" more broadly and includes, for example, IBM and Salesforce.com. On that top ten list, SAP is the only non-U.S. corporation.

Starting on page 4 of this PricewaterhouseCoopers publication, there's a list of the global 100 software leaders; an overwhelming majority of the companies on that list are from the U.S.

U.S. companies stand the most to lose from what Google is up to in the Oracle case, even if one focused only on APIs (which Google's proposed cert question doesn't). Who owns valuable APIs? It's hard to think of any non-U.S. company other than SAP that does. Of course, there are some key interfaces that do not belong to U.S. companies, but those are available on open source (or equivalent) terms, so everyone in the world is equally free to use them.

Generally, industry (segment) leaders are most likely to own valuable APIs. As Thomas Young has recently explained on his Copyright Culture blog, "[c]opyright law doctrines, such as scènes à faire, appear well suited to the task by delineating which expressions are copyrightable at the time of creation" but Google's proposed "focus on ex-post considerations, such as user familiarity, [would] undermine copyright's basic principles and threaten to penalize a copyright holder for creating a successful work that has achieved market saturation." The U.S. government cannot possibly want to penalize American companies for having succeeded in a key growth industry.

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Friday, March 27, 2015

Administrative Council offers 'formal recognition of the trade unions within the EPO's legal framework'

My hopes for some progress resulting from this week's meeting of the Administrative Council (AC) of the European Patent Organisation (EPOrg), the multinational body that runs the European Patent Office (EPO), haven't been exceeded by much, but I'm not disappointed either. Late on Thursday, a joint statement by the Chairman of the AC (Jesper Kongstad) and the EPO president (Benoît Battistelli) was published.

They promise to "launch new initiatives to restore social peace" and call for a "renewed social dialogue." The statement gets slightly more specific in that the first step could be "the formal recognition of the trade unions within the EPO's legal framework", and they "invite the trade unions of the EPO to a dedicated kick off meeting on 22 April 2015."

I believe SUEPO as a trade union speaks for the EPO staff at large. There's also an Association of the Members of the Boards of Appeal (AMBA) with a new website. It appears to me that AMBA's focus is on specifically judicial issues.

It could be that the EPO's leadership is pursuing a "divide and conquer" strategy so it doesn't have to face a united front of all EPO staff. If that is indeed the strategy, then it remains to be seen whether it will work out.

The announcement suggests that the EPO must now take some action based on the legal framework it has in place or that some amendment to the EPO's rules could be needed. Either way, yesterday's announcement is a diplomatic gesture and everything depends now on how this will be fleshed out. In the most negative scenario, the stakeholders would fail to agree on the terms of "formal recognition" of the trade unions. In the most optimistic one, there would be a new tone and a sense of partnership, which could lead to significant improvement.

Originally, president Battistelli declared himself unwilling to comply with a Dutch court order after the Dutch government ensured the ruling would not be enforced. The appeals court in The Hague had told the EPO to comply with certain rules that are fundamental human rights of employees of any organization in the civilized world. Enforceable or not, that decision has apparently shown to some of the governments of EPOrg member states that something needed to be done. The announcement of a plan to work toward formal recognition of trade unions suggests that the EPO(rg) at least doesn't want to overtly violate workers' rights and hide behind diplomatic immunity, which is always a last resort. So they say they're going to do something that happened in major EPOrg member states like the UK and Germany almost 150 years ago: to formally recognize trade unions. (Granted, EPO employees have always had the right to strike, so the current rules aren't medieval in all respects, but with recent changes that would require a strike to be approved by the president, the right to strike had also been effectively vitiated.)

That said, progress is progress. Better late than never.

There are still some important questions that need an answer. Judicial independence. Checks and balances. Conflicts of interest of AC members. Patent quality. But Rome wasn't built in a day, and staff input can (we'll see whether it actually will) help to arrive at better decisions in all those areas.

[Update] SUEPO has meanwhile reacted with an announcement of another demonstration (details will be communicated next month) and has expressed what I interpret as skepticism regarding the sincerity of the "social dialog" initative:

15 03 27 SUEPO Comments by Florian Mueller


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Thursday, March 26, 2015

European Patent Office revokes rubberbanding patent: Google and its partners win, Apple appeals

Two weeks ago I highlighted some smartphone patent cases that are still ongoing but have almost been forgotten by the public, including, among others, Google's continuing efforts to have Apple's European rubberbanding (overscroll bounce patent, EP 2126678, revoked. Originally, Samsung and HTC were also pushing for the same result, but due to HTC's worldwide settlement and Samsung's mutual ex-U.S. armistice with Apple, only Google (formally through Motorola Mobility) continued to participate in the proceedings. Still, Samsung and HTC's filings remained on the docket and relevant to the decision, so the time and money they had spent wasn't lost at all.

Last year, the EPO's Opposition Division had already communicated its preliminary position, which was that this patent is entirely invalid in Europe. The two-day hearing was held two weeks ago, with Google's lawyers from Quinn Emanuel Germany appearing on Motorola's behalf. At the end of the hearing, the decision to revoke this patent and to reject all of Apple's amendments (including any that were introduced in the meantime) was announced. This decision has now been made official on the EPO's website:

"The European Patent is revoked because, account being taken of the amendments made by the patent proprietor during opposition proceedings, the patent and the invention to which it relates were found not to meet the requirements of the [European Patent Convention] (Art. 101(3)(b) EPC)."

In mid-2013, the United States Patent and Trademark Office had upheld three claims of that patent, including one Apple asserted against Samsung in the 2012 trial (and the related 2013 retrial).

Apple still hasn't given up on its European rubberbanding patent. This is an iconic user interface feature that Apple clearly wouldn't want its competitors to implement in Europe. Apple's lawyers submitted a notice of appeal to the EPO on March 19, days after the hearing and prior to receiving the written decision that will state the reasons in detail soon. As a result, a Technical Board of Appeal will at some point have to review the Opposition Division's decision.

I've seen various Apple patents go down in Europe, but Apple hasn't been able to defend any European patent Android was actually found to infringe, not counting (of course) patents that were upheld in formal terms only because, after a negative decision that was appealed, settlements put an end to the proceedings. Depending on what kind of procedure we're talking about and in which jurisdiction, a settlement can salvage a patent only because of the withdrawal of a party, regardless of prior negative decisions on the merits.

If one brings a challenge to a European patent within nine months of publication of the grant, the EPO can still look at an opposition and, as in this case, revoke the patent with respect to al European countries in which it was registered. Thereafter, European patents have to be challenged on a country-by-country basis. That's why, for example, Apple's slide-to-unlock patent was held invalid by ten different judges in three different countries.

Losing a patent like slide-to-unlock or rubberbanding in Europe is a disappointment for Apple, but it has no bottom-line impact, at least not in the short term (and probably not even in the mid to long term, though it does make it harder for Apple to position itself as a breakthrough innovator and its competitors (especially those whose devices run on Android) as copycats.

To the extent that U.S. judges (especially at the Federal Circuit, the center of gravity of Apple v. Samsung at this stage) hear about such rulings, bad news for Apple's European patents may also, not as the most important factor but as another piece of the puzzle, dissuade American jurists from buying Apple's innovator v. copycat story. For someone who argues that courts need to protect its groundbreaking innovation, Apple's patent assertions haven't had a whole lot of merit, though this is an industry-wide issue: smartphone patent assertions usually go nowhere. The U.S. is not the only jurisdiction in which Apple can win at all, but it's the only one in which can win anything meaningful. Substantive patent law has not been harmonized between the U.S. and Europe, but cross-jurisdictional differences will likely play less of a role in the future given the impact of the Supreme Court's Alice decision (which has turned out bigger than I would have thought, though I still think some people blow it out of proportion).

Again, none of this should have Apple investors or its loyal fans concerned. Steve Jobs thought patent litigation would help to keep Android at bay, and we all know by now that it won't--still Apple is doing fantastically well and will continue to do so for years to come.

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Tuesday, March 24, 2015

This week's EPO Administrative Council meeting: revolution unlikely, progress badly needed

The Administrative Council of the European Patent Organisation, which operates the European Patent Office, still has to decide what to do about the (de facto) suspension of an internal judge (a member of a board of appeal, to be precise), an incident that has raised concerns from various sides, including high-profile judges and professional organizations. This is not the only rule-of-law issue the EPO(rg) faces: a ruling by a Dutch appeals court, even though it won't be enforced (at least for now), found the EPO's leadership in conflict with some fundamental human rights. This, in turn, has ever more politicians concerned.

Tomorrow and the day after (Wednesday and Thursday), the Administrative Council (basically the "shareholder assembly") of the EPO will meet. The IPKat blog (or at least one of its authors) has written an open letter to AC members, and I agree with its substance.

The AC will do all that it can to create the appearance of "business as usual," as it tried in December. It will focus on technicalities, which often come in handy as a smokescreen. I doubt that the EPO's president, Benoît Battistelli, will lose any sleep these days over fears he might be ousted. Still, progress is needed (badly, in fact) and there is at least hope (as I also sense in the IP community) that there could be at least some positive development.

A serious shake-up, which is probably inevitable in the mid to long term, would require different political dynamics. Turkeys don't vote for Christmas unless they are forced to. The national government delegates on the AC have reasons for backing Mr. Battistelli's controversial decisions and plans. The EPO is, indirectly, a cash cow for national patent offices (through renewal fees). Germany alone receives about 140 million euros per year in annual renewal fees for the German parts of patents granted by the EPO. National patent offices are given lucrative opportunities in the form of cooperation projects with the EPO, which the president controls. And AC members have frequently been (and some current AC members are rumored to be) given high-level posts at the EPO, where they usually get a much bigger paycheck than at home. More than enough reasons to favor stability over everything else.

So what can get those turkeys to vote for Christmas? Their bosses--the national ministers in charge--would have to order them to vote in certain ways, or there would have to be dynamics that threaten to have that effect (and possibly even worse effects for those who failed to exercise sufficient and responsible oversight). Unfortunately, the ministers have many things on their plate and they, too, want the EPO revenue stream (though they're unlikely to be interested in a VP post at the Office for themselves). But to a far greater extent than the public servants, the ministers will want to avoid bad publicity and critical parliamentary questions.

These past few months have apparently been the worst period in the EPO's history as far as bad publicity and critical parliamentary questions are concerned, apart from occasional debates over patents "on life." The news section of the EPO staff union's website contains links to various articles and official questions asked by members of the European Parliament (such as this document) as well as national parliaments.

For some more aggressive criticism, I recommend this website, which contains fliers written by anonymous EPO employees (thus not affiliated with SUEPO, the EPO staff union).

SUEPO will hold a demonstration tomorrow in Munich in order to draw additional attention to the issues (this post continues below the document):

15 03 23 SUEPO Flier by Florian Mueller

In a recent interview, Mr. Battistelli described the combination of the approach of French unions with German efficiency as a "dangerous cocktail." It's an interesting way to look at this, but those nationalities are found in many other international organizations (European Union, Council of Europe, NATO, and so many others), yet the EPO's labor dispute appears unique. I attribute this in no small part to the fact that some of the other large organizations actually have subscribed to human rights charters. If the European Patent Organisation joined the Council of Europe, as a SUEPO activist demanded at a demonstration I watched last year, EPO employees could take certain matters to the European Court of Human Rights (ECHR). Under the current circumstances, when a court like the one in the Netherlands confirms that even EPO employees have certain human rights, the EPO can use diplomatic immunity as a shield.

It will be interesting to see what comes out of this week's council meeting. Also, I plan to talk about the EPO's fees (the current ones as well as the proposed ones for the single European patent) soon in light of industry concern.

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Saturday, March 21, 2015

Revival of Oracle patent claims is another reason for Google to consider Java license agreement

If one applies "If you can't beat them, join them" to intellectual property rights (IPRs), the formula reads like this: "If you can't beat them and still need them, license them."

When Google's Android team decided to use Oracle's (at the time, Sun Microsystems') Java technology without a license, it knew pretty well that this could spell trouble. Andy Rubin himself wrote in an internal email that "[doing] Java anyway" would make it necessary to "defend [that] decision, perhaps making enemies along the way." I wouldn't consider parties to every legal dispute enemies, and in my view Oracle and Google could and should be great partners. But adversaries they are. Until they settle, that is.

More than 4 1/2 years ago, Oracle (after acquiring Sun Microsystems) sued Google for alleged patent and copyright infringement. Initially, the public perception (including mine) was that the seven patents in the case were more important than the copyright part. The initial complaint stated a set of specific patents and we were all able to look at them, while the copyright claim was initially unspecified (Oracle even had to amend its complaint for that reason). But as the dispute progressed, Oracle's lawyers placed an ever clearer emphasis on the copyright part of the case. I have no idea whether this had also been the priority from the get-go, but even though it might have been misperceived as a "throw in the kitchen sink" claim, I'm quite sure Oracle knew all along that the copyright claim all by itself had the potential to convince Google of the benefits of a license agreement.

In parallel to the district court case, Google challenged all of Oracle's patents-in-suit through reexamination requests filed with the United States Patent and Trademark Office. Depending on the rules applicable to each patent, Google requested either an inter partes (where the requester remains formally involved throughout the process) or an ex parte (where the requester triggers the proceedings without becoming a party to them) reexamination. Then a variety of first Office actions (which are sometimes just meant to challenge the patentee without necessarily indicating that a patent is doomed) and of "final" (but, in reality, far from final) decisions came down. It looked like Oracle's Java patents were falling apart. The district judge was unwilling to take patent claims to trial as long as the USPTO deemed those claims invalid. Oracle took only two patents to trial (on which it didn't prevail in district court and which it didn't even care to pursue on appeal) and dropped five with prejudice in order to save time.

Even while the trial was ongoing, one of the dropped patents rose like Phoenix from the ashes, but the judge said this reversal came too late for the patent to be reasserted.

As I explained then, this still doesn't mean Google would never have to worry about that patent: even if one assumed for the sake of the argument that Judge Alsup succeeded in getting Oracle to drop certain patents without any exception as far as Google itself is concerned, Android device makers might still be liable for infringing that patent with their devices.

The same holds true for any other patents that Oracle could salvage, and one other patent is now on the road to recovery. Yesterday (Friday), the United States Court of Appeals for the Federal Circuit handed down a ruling (PDF) on Oracle's appeal of the USPTO's rejection (affirmed in November 2013 by a Patent Trial and Appeal Board, basically a USPTO-internal court) of various claims of U.S. Patent No. 6,910,205 on "interpreting functions utilizing a hybrid of virtual and native machine instructions." While claims 1 and 8 remain invalidated, the Federal Circuit has held that the USPTO (to be more precise, the PTAB) had misconstrued a key claim term (which relates to overwriting data) and therefore remands for a new decision with respect to the claims for which the interpretation of that term is outcome-determinative: claims 2–4, 15, 16, and 18–21.

Like the aforementioned "Phoenix" patent, this one has a 1997 priority date, so it won't expire before the year after next. Theoretically there would still be time (after the USPTO reaches a new decision) for Oracle to seek injunctive relief (such as an ITC import ban) over it--but in more practical terms, any assertion would likely be about damages. This is actually still more hypothetical than anything else. I guess the parties will continue to focus their litigation efforts on the copyright part of the case and just sort out the patent-related aspect as one of various items whenever they settle. In settlement negotiations all options of both litigants must obviously be considered.

For Oracle (represented by a Morrison & Foerster team led by Marc Hearron), yesterday's ruling is another appellate victory over Google that demonstrates its determination to defend its Java IP. No matter how many years it may take.

Many patents asserted in the major smartphone patent disputes have faced uphill battles when their validity was challenged by defendants. It happened to those Java patents as well. But the longer it takes, the clearer it is that some "rejections" of claims were wrong.

I plan to write about the copyright part of Oracle v. Google again soon. In January, the Supreme Court asked the Obama Administration for input. After the SCOTUS receives the Administration's brief, it will decide on whether to hear the case (if it doesn't, or if it does grant certiorari but later affirms the Federal Circuit, Oracle will have prevailed definitively on copyrightability and the case will go back to district court for "fair use" proceedings).

Just yesterday, the Wall Street Journal described Google as "one of the White House's closest corporate allies." The Journal went on to note that "Google was the second-largest corporate source of campaign donations to President Barack Obama's re-election effort" and that "Google executives have visited the White House scores of times since Mr. Obama has been in office, according to visitor logs." But Google is pretty much isolated in the U.S. economy (with the greatest respect for the likes of Oracle foe HP and Java free-rider Red Hat). The software industry is overwhelmingly on Oracle's side.

In order to support Google here, the Department of Justice would have to take outlier legal positions. As the Copyright Alliance's TerryHart wrote, "Despite legal gymnastics, Google can't land split in Oracle cert petition." Not only would the DoJ have to subscribe to daring legal theories to do Google a favor (which I'm absolutely not suggesting that it even intends to do) but it would also have to act against broader U.S. interests. By and large, the world's most valuable application programming interfaces (APIs) belong to U.S. high-tech companies or they belong to no one (because they're available on open source terms). Again, I'm going to talk about that soon.

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Friday, March 13, 2015

On appeal, Samsung is challenging everything Apple won at last year's California patent trial

The mixed verdict Apple got at last year's trial in the second California case against Samsung was a disappointment especially with respect to damages: while $119 million would make a lot of companies extremely happy, Apple wanted roughly 20 times as much. It couldn't hide its dissatisfaction because it shortly thereafter requested a retrial. It was, practically speaking and especially when considering the circusmtances, a win for Samsung's lead counsel in that case, John Quinn, who nevertheless told the media that what Apple obtained was "unsupported by evidence". Mr. Quinn said, already back then, that Samsung's objective in the post-trial proceedings and, if necessary, on appeal would be to reduce Apple's damages award to zero.

Judge Koh denied, with minor exceptions, both parties' post-trial motions. Apple didn't get more money or a new trial, but its award wasn't reduced either. Roughly ten months later (the parties had to await a ruling on Apple's ongoing-royalties motion before they could bring an appeal on the merits), Samsung has now filed its opening brief with the Federal Circuit, and it's definitely pursuing the agenda its lead counsel outlined in the spring of 2014. Samsung is indeed challenging each and every part that worked out in Apple's favor last year (this post continues below the document):

15-03-06 Samsung Opening Brief (Fed. Cir.) by Florian Mueller

Samsung still doesn't want a new damages trial on Apple's patents. For a jury that reached a decision on Apple's home turf, despite statistics (by someone who is now a Federal Circuit judge) that U.S. juries tend to favor U.S. companies over foreign rivals to a far greater extent than U.S. judges do, this was a really good outcome for Samsung and a retrial would come with a risk of a greater damages award that seems considerably bigger than the opportunity for Samsung to reduce the amount on retrial. Apple will presumably keep pushing for a retrial, as it already tried in district court.

However, if a new trial was ordered, Samsung would want a key damages-related issue concerning the '647 "quick links" patent to be handled differently on retrial. And regardless of whether a new trial will or will not be held on Apple's offensive case, Samsung would like a new trial on one of its own patents (last year, it prevailed on one of two offensive patents).

Samsung is challenging all of Apple's patent infringement claims on the merits. The emphasis is clearly on the '647 "quick links" patent. At the end of the week before the one in which the trial was scheduled to start, the Federal Circuit affirmed Judge Posner's claim construction of the '647 patent in an Apple v. Motorola case. I still believe Judge Koh could have thrown out the '647 patent right before the trial, but instead she just allowed both parties to present more evidence, denied their related motions for judgment as a matter of law, and deferred to the jury. Now Samsung asks the Federal Circuit to hold that under its claim construction Samsung's accused products don't infringe because they lack a separate "analyzer server" (a key claim limitation Judge Posner had addressed) and because of differences between the claim construction and the accused technologies in terms of how actions are linked to data structures. If the appeals court agrees with Samsung on only one of the two claim limitations, there's no infringement, and the bulk of Apple's damages award is lost.

While it appears that Apple probably won't obtain an injunction, the '647 patent would (should Samsung's appeal on the merits not succeed) presumably give rise to a future dispute over ongoing (postjudgment) royalties, given that the parties disagree on the scope of that patent. It's easy to imagine a situation in which Samsung would argue that it has worked around the patent and Apple would say that it has not.

While the other patents are a lower priority, Samsung nevertheless tries to get the other four Apple patents-in-suit (slide-to-unlock, autocomplete, unified search, synchronization) invalidated, and it argues that it never infringed the autocomplete patent with devices that have a keyboard on a touchscreen as opposed to a physical keyboard separate from a screen.

Samsung still believes the district court didn't even have jurisdiction to award Apple postjudgment royalties since Apple's appeal of the denial of an injunction was pending at the time (that appeal was recently heard and a ruling should come down in a matter of months now).

With respect to the damages amount, Samsung finds that it was unfairly disadvantaged by, for example, not being allowed to use the terms of Apple's license agreement with HTC and Apple's '647 damages claim in the aforementioned Motorola case (on a per-unit basis, only about 5% of what it demanded from Samsung) as real-world evidence of the actual value of Apple's patents-in-suit. There is also a disagreement between Samsung and Apple concerning a "blackout" period (Samsung argues it makes no sense to assume in a hypothetical scenario for damages calculation purposes that Samsung would have released an infringing product a year after receiving notice of an infringement allegation only to immediately develop a designaround and re-release it a few months later -- I would agree that "hypothetical" behavior is different from "totally implausible" behavior). These evidentiary issues would only play a role if Apple's request for a new trial was granted. Otherwise Samsung is fine with focusing just on the merits at this stage.

While consistent with what its lead counsel said after last year's trial, Samsung's "carpet-bombing" of last year's ruling is different from what I see in a majority of the multi-patent cases I watch. Most appellants actually accept some unfavorable parts of the outcome in district court in order to focus on only one or two, or maybe three or four, key issues in the appeals court. That is especially the case when the commercial significance of one or two issues very clearly outweighs that of any smaller losses in district court. But there are scenarios in which companies will attack a ruling in its entirety:

  • if they think that their arguments are pretty strong on all of these issues (so they don't see why they shouldn't raise them all at the same time),

  • if they feel they can state their argument concisely (in writing and at the hearing) so they don't need to drop smaller issues in order to have more room and time for their biggest priorities,

  • if they believe it's the best approach with a view to ongoing settlement talks (because the other party then has to negotiate on the basis that in a worst-case scenario it might lose everything on appeal), or

  • if they believe this makes things harder for the other party when it responds (Apple will now have to counter a number of Samsung arguments but would actually like to focus on its own priority, which is to get a new damages determination from another jury; there's no doubt that Apple's lawyers will do a great job countering Samsung's points, but when I read Samsung's brief, I felt that effective counterarguments may need significantly more space).

I have no idea what Samsung's agenda is, and I don't mean to second-guess them and their lawyers. Any or all of the four potential reasons stated above would be plausible here. I can easily see why Apple would not be overly enthusiastic about pursuing this appeal, which is an uphill battle because last year's jury trial didn't work out too well even though it took place in Apple's backyard. In order to get a more significant win out of this second California case, Apple would need the appeals court to order a new trial, but not on a basis on which it agrees with Samsung on any of its key points (just a finding of non-infringement of the '647 patent would make the retrial much less interesting; additionally or alternatively, if Samsung was allowed to present some of its real-world evidence, Apple would have a hard time justifying its outsized damages claim). Even if that happened (and that combination is certainly not easy for Apple to get), that retrial would take place in 2016 at the earliest. "At the earliest" because there could be significant delay (for example, I could see Samsung appeal certain issues, possibly relating to the '647 claim construction but also the exclusion of real-world damages evidence, to the Supreme Court if necessary). Then there could be an appeal after the retrial. This would take forever and lead nowhere in the end. It should simply come to a negotiated end, and the best timing for Apple would be before its appeal of the denied injunction is adjudicated (because I believe the decision would more likely up the ante in future cases involving Apple's smartphone patents than it is to indicate how Apple could do better with future attempts).

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Thursday, March 12, 2015

Some almost-forgotten, still-pending Android-related patent cases involving Apple, Microsoft

Long gone are the days (in 2010 and 2011) when major players in the smartphone industry brought seemingly-spectacular patent infringement suits against each other. Such cases have still been filed ever since, but less frequently so. And they lack something. When Microsoft sued Motorola or Apple sued Samsung, this looked like a huge war--"thermonuclear" war according to the official Steve Jobs biography. Nowadays, it's just about money, not market share. There's Apple and Ericsson fighting over money (but Ericsson does not compete with Apple) and Microsoft suing Kyocera, which demonstrates that the new CEO still backs the intellectual property and licensing department's Android patent business but won't really have an impact on the market at large no matter what happens there.

In 2010 and the following few years, it was really about Android's rivals (Apple, Microsoft) asserting patents against Android companies, and about countersuits. Motorola v. Apple was special because Motorola wanted to achieve two things: extract royalties from Apple (no longer a strategic priority after Google bought it) and launch a preemptive strike against Apple's Android patent assertions (which is why Motorola asked for declaratory judgment concerning more than a dozen patents Apple had previously asserted against HTC). But after the first few months of 2011 (when Microsoft brought its second Android-related suit, against Barnes & Noble, and Apple sued Samsung), neither Microsoft nor Apple brought a new infringement case (Microsoft's Samsung contract case was only a contract case) against another Android device maker--until Microsoft sued Kyocera this month.

Microsoft settled with Barnes & Noble (as part of a wider-ranging partnership) and, as everyone expected, with Samsung. In 2012, Apple settled with HTC, and last year it entered into second-class settlements (withdrawals without a license) with Google/Motorola and, with respect to the ex-U.S. part of the once-earth-spanning dispute, with Samsung.

If "second-class settlements" just sounded a bit derogatory, that's because comprehensive settlements involve a license deal for at least a certain number of years--or maybe a covenant not to sue, which can have the same or a similar commercial effect. But a mere withdrawal without prejudice is somewhere between a ceasefire and a real settlement.

What demonstrates the limited effect of Apple's armistice with Google/Motorola is the fact that they these parties are actually still fighting against each other in at least one context. Yesterday the European Patent Office started the two-day hearing on Motorola's opposition (Samsung and HTC withdrew their opposition as part of their deals with Apple) to Apple's European rubberbanding patent. I'll try later, or tomorrow, to find out about the result. The preliminary opinion was negative. I'm sure Apple will fight hard to at least salvage the patent in a narrowed form.

I guess the reason why Google (through Motorola) is still fighting against that patent is because it would remain a threat to the Android ecosystem at large, not just Motorola, and if the opposition was dropped, the opportunity to do away with the patent on a Europe-wide basis would be lost: any new filing could only challenge the patent in one particular country at the time, such as Germany or the UK, so it would take multiple suits to attack it in all European jurisdictions in which it has been registered.

One could almost forget that Microsoft v. Motorola is still ongoing after almost 4 1/2 years. This dispute was definitely one of the most interesting smartphone patent spats especially after Google announced (and later consummated) the merger agreement with Motorola Mobility. At some point, there was even the possibility of Google Maps being shut down in Germany (which didn't happen, and the patent will expire soon). Now it appears that neither party is interested in escalation. Rather than bringing additional cases against Motorola (which it hasn't in years, unless there's something going on in stealth mode at courts in jurisdictions that are less transparent than the U.S.), Microsoft apparently picked Kyocera as a new Android-related target. To the best of my knowledge, Google hasn't brought any new infringement case either in quite a while. This looks like an informal non-escalation agreement (which sometimes happens even without parties coordinating merely because they see each other's behavior and draw their conclusions from it).

I also suspect some kind of informal agreement--in this case, between the court and the parties--in the case Microsoft brought against the U.S. government (and, by extension, Motorola Mobility) in July 2013. Microsoft wanted a preliminary injunction that would force the administration to interpret and enforce an import ban (which Microsoft won against Motorola over a meeting scheduler patent in May 2012) the way Microsoft would like to see it interpreted and enforced. The ITC said Microsoft should instead request an ITC enforcement proceeding.

The last item on that docket of the United States District Court for the District of Columbia is a procedural order (allowing some filings) of March 31, 2014. I haven't previously seen a case in which a preliminary injunction has been requested and no decision has come down in almost two years--and no progress of any kind is shown on the docket in almost a year. This even more remarkable when considering that the Federal Circuit affirmed the import ban in question well over a year ago, so there's no need to wait for further progress on the merits side before adjudicating an enforcement dispute. As the saying goes, justice delayed is justice denied. Here, it may work the other way round: the case is delayed forever because it could only result in a denial.

Lest we forget, Motorola is still appealing Judge Robart's FRAND determination. It originally wanted to take that case to the Federal Circuit, which didn't work out (Motorola itself had originally brought an appeal relating to this lawsuit in the Ninth Circuit), so now it's pending in the Ninth Circuit, which ruled against Motorola in 2012 with respect to an anti-enforcement injunction that prevented it from enforcing a couple of German patent injunctions against Microsoft. Pleading is complete and the appellate hearing has been scheduled for April 8, 2015.

In Germany, Microsoft lost (except for one patent it salvaged in a narrowed form) all of its patents-in-suit against Motorola in the Federal Patent Court of Germany and appealed several of those cases to the Federal Court of Justice. Maybe some final rulings on those nullity actions will come down this year. I'll try to find out about that.

So some clean-up is still needed--and ongoing--with respect to certain disputes that are 4 to 5 years old. That obviously applies to the U.S. part of Apple v. Samsung, too.

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Monday, March 9, 2015

EPO human rights issues and EU patent (litigation) reform: questions and concerns

Before the European patent system can grow in terms of having an EU unitary patent and a European Unified Patent Court (UPC), it may have to improve in some fundamental respects. Of course, improvements could also happen simultaneously with expansion, as part of the same package of measures. But if improvements were postponed indefinitely, prior expansion could have unintended negative consequences.

There are two key areas of concern:

  • the impact of the future UPC's rules of procedure on the tech industry, particularly companies that have to defend themselves against patents that wouldn't survive an invalidity challenge, and

  • the human rights conflict at the European Patent Office (EPO), which has recently escalated because EPO staff won a ruling form a Dutch appeals court but the Dutch government won't allow it to be enforced against the EPO for immunity reasons.

While industry concerns over UPC rules and a labor conflict at the EPO are undoubtedly separate issues, they involve essentially the same policy makers at the national governments that run the EPO and will run the UPC. This is a rather critical perspective but one might even say that both issues share the same root cause: due to the highly specialized nature of patent law, top-level policy makers defer too much to the experts who presumably are knowledgeable about the law (I don't have any reason to doubt that part) but, unfortunately, have an agenda of their own. It's the agenda of a system that has gotten out of control and of people whose careers benefit from expansion, rather than improvement, of the system. The net effect is that top-level decision-makers, such as national government ministers, put the fox in charge of the hen house, which appears to be a convenient choíce but inevitably results in institutionalized excess. I've said it before: this is a structural problem; any mistakes made by the people in charge are, at best, secondary.

The victims of this structural problem are the EPO staff on the one hand (I don't have a position on their compensation or anything like that, but I do believe that they should be protected in accordance with contemporary human rights standards) and, if things go wrong with the UPC, industry on the other hand.

Here's the latest with respect to industry and staff concerns:

  • A broadbased tech industry coalition that includes companies that are or used to be embroiled in litigation with each other (such as Microsoft and, through Motorola and now also Kyocera, Google) has previously raised concerns over the proposed UPC rules of procedure. I reported on a mid-November hearing and, previously, open letters published in September 2013 and February 2014.

    A few days ago I discovered the UPC Industry Coalition's new, official website. It contains some video recordings of industry players voicing their concern and a pretty good infographic, which explains how the "injunction gap" (an issue I highlighted in my analysis of 222 smartphone patent assertions last October) allows holders of patents that should never have been granted in the first place to get leverage over defendants. The infographic states that "[a] majority -- about 67-75% -- of patents are wholly or partially invalid" (which various studies have shown, and in connection with smartphone patents it's even worse) but doesn't mention something that I'd like to add here: if a settlement occurs before the invalidity of the patent-in-suit has been established in court, it's not just bad for "Company A" but will also hurt the rest of the industry, which will face the same dilemma.

    The website lists 16 signatories, some of which are industry associations that actually represents many companies. Compared to the groups that signed the aforementioned open letters, Apple is notably absent but I presume it still supports most if not all of the coalition's positions. It appears to me that a key objective was to have a stronger European component (European companies, European industry associations) than before, so maybe some U.S.-based supporters were purposely left out. For example, the videos all feature CEOs of European small and medium-sized enterprises (SMEs), which is a smart choice for political reasons. Just speculating, as I sometimes do (and sometimes refuse to do, depending on issue/context).

    I recently pointed to an article by Germany-based patent litigator Dr. Björn-Ingve Stjerna on the legal proceedings surrounding the Unitary Patent and the UPC. That document has meanwhile been updated.

  • The EPO staff union (SUEPO) added a news item yesterday on questions posed by a Dutch member of the European Parliament (Dennis de Jong, a socialist) to the European Commission. His parliamentary group, GUE/NGL, is far more interested in workers' rights than in strengthening intellectual property proection, but that inclination does not diminish (not in the slightest) the legitimacy of his well-stated questions, which I'd like to show you:

    Question for written answer E-002507/2015
    to the Commission
    Rule 130
    Dennis de Jong (GUE/NGL)

    Subject: Rights of staff and ethical standards at the European Patent Office

    Reports are emerging of an unpleasant working environment and staff intimidation at the European Patent Office (EPO). Further information can be found on the EPO Staff Union website. Because of the importance of the EPO for EU patents legislation, the Commission cannot afford to ignore the problem.

    1. Does the Commission still intend to work together with the EPO on the single European patent?

    2. If so, what guarantees have been or will be given to the Commission regarding respect for the trade union and other rights of EPO staff?

    In addition to the rights of staff members, a number of ethical issues are also arising within the EPO, including the recruitment and dismissal of senior officials. For example EPO President, Benoît Battistelli, has succeeded in dissolving the Audit Committee and replacing a number of executives with a team of his own choice that is suspected of corruption [related footnote: "See for example the ZAMP affair and controversies surrounding other questionable practices." with a link to a TechRights article]

    3. What guarantees has the Commission obtained to satisfy it regarding the integrity of the EPO?

    There's also a document from another European (but not EU) parliament, the Parliamentary Assembly of the Council of Europe (a diplomatic non-EU body whose members include many non-EU member states and which places particular emphasis on human rights matters) from 2013. The paper argued that international organizations such as the UN, the World Bank and the EU should protect the human rights of employees of international bodies enjoying immunity under national law. I understand from SUEPO's website that this report was adopted by the parliamentary assembly.

    This morning, the IPKat blog published its latest story (I also recommend the previous ones) on the EPO labor dispute.

These issues were not created by the EU. However, the EU institutions should take a closer look at the current situation before the EPO starts to grant the EU unitary patent (which could become such a large part of the EPO's "business" that the EPO would effectively be an EU subcontractor -- by far the largest one, of course -- more than anything else) and before the procedural rules are set for the UPC on a basis that could have very negative effects on European SMEs.

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Saturday, March 7, 2015

Kyocera becomes third Android device maker to be sued by Microsoft over allegedly infringed patents

Microsoft has concluded dozens of license agreements with Android device makers, and relative to the number of license agreements doesn't sue very often, but from time to time it does happen. Yesterday, Microsoft filed this complaint here against Kyocera over seven patents allegedly infringed by its Android-based devices (this post continues below the document):

15-03-06 Microsoft Complaint Against Kyocera (WAWD15cv346) by Florian Mueller

This makes Kyocera the third Android device maker to be sued by Microsoft over allegations of patent infringement. The first ones were Motorola on October 1, 2010 (that dispute is still ongoing with no signs at this stage of Motorola coming under serious pressure to take a license) and Barnes & Noble in early 2011, a dispute that was settled prior to any formal ruling (an ITC staff recommendation had, however, been negative on Microsoft's asserted patents). Last year Microsoft also sued Samsung, but that was a contract (as opposed to infringement) case, and it was settled recently (also before any ruling).

I guess Google will lend some support to Kyocera with respect to software patents that would be infringed by all Android devices should Microsoft's allegations be true.

I used to believe for a long time that Microsoft had a patent portfolio especially in connection with operating system technologies that would really enable it to win impactful sales bans against Linux-based (and, later, Android-based) devices. I was consistent about that

  • while I was working against Microsoft (as an anti-software-patent campaigner in Europe in 2004-2006),

  • while I was neutral with respect to Microsoft (the following years), and

  • while I was doing some work for Microsoft (a fact that I disclosed here in 2011 without any obligation to do so).

Similarly, I thought Apple would also hold patents that would give it leverage over Android. That's what Steve Jobs thought. We now know he was wrong, and I take comfort in having been in excellent company in that regard.

Last fall I published my analysis of what has so far come out of 222 smartphone patent assertions (most of them against Android devices, but also including some countersuits by Android device makers): very, very little, if anything. And Microsoft's hit rate, at the time, was no exception. (Thanks, belatedly, to ZDNet's Steven Vaughan-Nichols for sharing my related chart with his readers.)

Despite that track record (including all the frustration that it must mean to have been unable for about 4.5 years to force Motorola into an Android patent license agreement), Microsoft has decided to bring this suit against Kyocera. Apparently Microsoft wants to demonstrate that it is still prepared (even under its new, open-source-friendlier CEO) to take legal action against those who refuse to pay license fees on their Android-based devices. It may also believe that it still has some pretty good patents in its portfolio that it hasn't asserted before.

So let's look at the patents-in-suit:

  1. U.S. PatentRE40,989 on "atomic operations on data structures"

  2. U.S. Patent No. 7,137,117 on "dynamically variable idle time thread scheduling "

    This is a typical operating system patent. Thread scheduling per se existed before this patent was filed, so the key validity question is going to be whether the addition of a "dynamically variable idle time" was new and inventive in June 2000. Interestingly, claim 4 of the patent specifically mentions "Linux" (as one of several operating systems).

  3. U.S. Patent No. 7,289,102 on a "method and apparatus using multiple sensors in a device with a display"

    This is a patent in the gray area between hardware and software patents. One might view it as a hardware patent but the signal processing it covers would most likely be implemented in software rather than circuity. I don't know whether Android internally performs the accelerometer-related operations the patent is all about.

  4. U.S. Patent No. 6,349,344 on "combining multiple Java class files into a run-time image"

    Obviously, Sun Microsystems didn't have a patent on filing patents related to Java, thus Microsoft was free to do so as well.

  5. U.S. Patent No. 7,062,274 on "increasing the level of automation when establishing and managing network connections"

  6. U.S. Patent No. 7,062,715 on "supplying notifications related to supply and consumption of user context data"

  7. U.S. Patent No. 7,050,408 on "communicating multi-part messages between cellular devices using a standardized interface"

    This is the U.S. equivalent of EP1304891, which the Federal Patent Court of Germany held invalid in a May 7, 2014 ruling (I attended the first few hours of the hearing, and when I left, the outcome was easy to predict). Microsoft appealed that decision to the Federal Court of Justice and apparently believes it can get a better outcome in the United States.

Microsoft stresses that this selection of patents (it obviously can't take Kyocera to court over hundreds of patents at the same time) demonstrates the "breadth" of the part of its portfolio that it alleges to be infringed by Android-based devices. No doubt about breadth, but how about strength? That's what this litigation will have to show as it unfolds, unless the parties settle before a decision comes down.

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Thursday, March 5, 2015

U.S. appeals court unlikely to grant Apple an injunction against Samsung over three software patents

The five-year anniversary of Apple's patent enforcement efforts against Google's Android mobile operating system (on March 2, 2010, Apple sued HTC) went unnoticed because there was nothing to celebrate in Cupertino. Half a decade after Steve Jobs told his biographer he considered Android a "stolen product" and wanted to "right this wrong" by means of thermonuclear patent war, it's clear that this industry's greatest product visionary simply overestimated the impact that his company's patents would have. Other companies than Apple haven't been much more successful in recent years, to be fair. This is an industry-wide issue.

Yesterday, the United States Court of Appeals for the Federal Circuit held a hearing on Apple's appeal of Judge Koh's August 2014 denial of a permanent injunction against Samsung based on the spring 2014 trial in the second California litigation between these parties. It's the sole remaining case in which Apple is still trying to obtain injunctive relief against Android-based products anywhere in the world. In July, Apple dropped a cross-appeal that could have led (in theory) to an injunction against Samsung based on the first case (which had initially gone to trial in the summer of 2012).

After seeing various reports (such as this one on AppleInsider) that already suggested Apple faced a skeptical court, I've just listened to the official recording (MP3) and agree that affirmance of the denial is the most likely outcome.

On Apple's behalf, WilmerHale's Bill Lee argued, as he and his team already had in their appellate briefs, that this time around Apple was entitled to an injunction despite unfavorable results in prior proceedings, attempting to distinguish the present injunction push from previous ones on three bases:

  1. feature-based rather than product-based injunction

  2. availability of designarounds (at least at the end of a sunset period)

  3. reputational injury

In its responsive brief, filed in December 2014, Samsung said that no matter what Apple says, it still couldn't tie patented features to lost sales. But that's what the causal nexus requirement that was at the heart of previous Apple-Samsung injunction denials is all about.

A majority of the three-judge panel -- specifically, Chief Judge Prost and Circuit Judge Moore -- appears to be unimpressed with Apple's new twist. Mr. Lee tried hard to win them over, but at the end of the day they appear to feel that none of Apple's "new" arguments get Apple over the decisive hurdle of showing a causal nexus between the infringements identified by the jury (those findings are on appeal and at least a partial reversal is quite a possiblity) and the irreparable harm it claims to suffer. Apple would like its "new" arguments to have a bearing on all eBay factors, but the most critical one, irreparable harm to Apple, must be shown regardless of the scope of the injunction and regardless of the availability of designarounds at the end of a sunset period. A purely reputation-based argument (having to compete against one's own features) doesn't appear to have traction either. Samsung's counsel, Quinn Emanuel's Kathleen Sullivan, noted that neither Apple nor Samsung ever advertised the features in question.

Samsung's counsel also had to answer some questions that appeared reasonably tough, but the one that was posed most emphatically ("why are you fighting [Apple's injunction request if you say you don't infringe anyway]?") had absolutely nothing to do with Apple's need to establish a causal nexus.

Of the three judges, Circuit Judge Reyna appears (only relatively speaking) most sympathetic to Apple's appeal. He expressed great admiration for Apple's contribution to innovation in a 2013 ruling in an Apple v. Motorola case. However, the patent Judge Reyna described as an example of true innovation at the time related to much more fundamental technology than anything at issue between Apple and Samsung (at least the patent in that Motorola case might have been important if a more powerful claim had survived, which it should have in Judge Reyna's dissenting opinion).

This appeal is unlikely to give Apple strategic leverage. Also, I'd like to point you to this IPWatchDog post on why a recent Supreme Court ruling should (adversely) affect the design patent-related part of Apple's first Samsung case. The related Federal Circuit hearing took place three months ago, so a ruling could come down anytime. There's a third Apple-Samsung appeal pending before the Federal Circuit. In that one, Apple is trying to get a more favorable outcome than at last year's trial while Samsung (which could easily live with last year's result) is also trying to improve its position. Samsung will file its appellate brief any moment now (its counsel announced this at yesterday's hearing).

Is it really in Apple's interest to get appellate decisions in those cases? I don't think so. I have said before that Apple should rather settle before a decision (on design patents, for instance) comes down. Based on how yesterday's hearing went, I think a settlement makes even more sense for Apple. Every time it is denied an injunction, things get harder the next time. Apple should look past the Samsung dispute (as it has in all other jurisdictions than the United States) and focus on matters such as its royalties fight with Ericsson, where there's a key issue (the proper royalty base) that can have far more impact on Apple's bottom line over the next five years or more than the remaining issues it has to sort out with Samsung at this stage.

For now, Apple is doing extremely well despite Android's huge worldwide market share. Should this change, then it may have to try again to obtain injunctions. And then it may have a stronger case for irreparable harm than it has in the current climate.

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