Friday, February 26, 2016

In second California case, Apple wanted billions from Samsung, gets nothing but must pay millions

Apple's second California case against Samsung-- filed in 2012, about 10 months after the first Apple v. Samsung complaint--has turned out to be a non-starter. As I predicted in early January based on the official recording of the appellate hearing, the United States Court of Appeals for the Federal Circuit has thrown out the 2014 district court ruling in Apple's favor (which was already a major disappointment for Apple, as Apple got only about 5% of the roughly $2.5 billion it originally wanted).

The Federal Circuit opinion is available here (PDF).

Here's my takeaway:

  • It's a humiliation for Apple. I'm not happy to say so because I actually think very highly of Apple's in-house and outside counsel. But the outcome (which this decision is, though I guess Apple will petition for a rehearing) couldn't have been worse. Apple has lost its offensive case 100%, but Samsung's symbolic win (over one of two counterclaims) has been upheld.

  • As a result, Apple will have to pay Samsung a few million dollars in damages and actually a lot more in litigation costs. The Federal Circuit opinion says "costs to Samsung." That could be tens of millions of dollars in the end, depending on whether Apple will suffer the fate of other litigants who have brought claims without merit. Some of the cost reimbursement will then be passed on to Google, which paid for parts of Samsung's defense.

  • By now, 18 judges in four countries (adding the three members of the Federal Circuit panel to the 15 European judges who ruled on a patent from the same family before) have held that Apple's slide-to-unlock mechanism, however good the idea was from a usability point of view, simply isn't a patentable invention. The only judge among the 19 who ruled on this patent who thought iw as valid: Judge Lucy Koh.

  • Judge Koh can only hope that Republicans (who may be inclined to oppose her nomination, by a lame-duck failed president, in any event) won't take a close look at her track record in the highest-profile litigation she presided over. That track record is not very good. I don't mean to suggest that the Federal Circuit is always right, and in the injunction context the Federal Circuit presented kind of a moving target, but the fact that she, unlike all of her 18 colleagues who looked at slide-to-unlock, deemed it a valid patent is nothing for her to be proud of. (Of course, the Ninth Circuit doesn't hear patent cases.)

  • I also believe she handled the situation concerning the '647 patent the very wrong way. After the Federal Circuit affirmed (right before the 2014 trial) Judge Posner's claim construction, it was crystal clear to me that Apple no longer had a case over that patent. I made it very clear at the time. I never understood why Judge Koh didn't throw out that patent, period.

  • I've said this many times and I'll repeat it here: Apple should finally put an end to this Samsung litigation. The entire "thermonuclear war" on Android was a bad idea. Yes, there was a time when I thought Apple (and others) could win this. At some point, however, I drew the necessary conclusions from what happened (and, even more so, what didn't happen). That "earned" me some conspiracy theories on discussion boards even though I honestly didn't believe in Apple's second California case at the time of the 2014 trial.

  • On March 4, the Supreme Court will discuss Samsung's cert petition regarding design patents, which is support by the IT industry at large, 37 IP law professors, and various advocacy groups.

Apple can do better than this. It's high time this amazing company recognized one of its biggest errors.

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Friday, February 19, 2016

Samsung to SCOTUS: 'The law of the smartphone cannot follow reflexively from the law of the spoon.'

The SCOTUSblog has published Samsung's reply brief in support of its petition for writ of certiorari (request for Supreme Court review) in Apple's design patents case. You can find Samsung's filing here.

Two weeks ago, Apple told the top U.S. court that it should not hear the case since it was "legally unexceptional." Apple accurately pointed to the fact that the claim construction-related part of Samsung's petition has far less support than the part concerning damages (disgorgement of unapportioned infringer's profits), but other than that, Apple's opposition filing simply couldn't downplay the importance of the issue in question. Right at the start of its reply brief, Samsung points to the "contrary [to Apple's position] view of nine high-technology companies, thirty-seven intellectual property professors, three groups representing minority and rural communities, two public interest organizations, a high-tech industry organization, and a small company that have filed amicus briefs in support of the petition." Certiorari should not be a campaigning contest, but in this case, with even some of Samsung's fiercest competitors supporting its position, there is no denying that a high quantity, quality and diversity of amici curiae would like the Supreme Court to review the Federal Circuit's decision.

The sentence I quoted in the headline appears at the end of the introductory section, just where Samsung makes the case that after more than 120 years it's time for the Supreme Court to take a look at design patents again.

Samsung's lawyers accuse their colleagues working for Apple of "rhetorical excess" because they "repeatedly incant[ed] broad, vague design concepts" such as "the iPhone's innovative look" rather than properly portray the narrow scope of the three design patents-in-suit. This is a common pattern in Apple v. Samsung, also in connection with software patents. Apple points to how its products revolutionized the market, but that doesn't mean that its patents rock. Much to the contrary, the most valuable software patent from the first Apple v. Samsung case has been held invalid by the USPTO, one key iPhone design patent has been rejected (in a first Office action after two years of consideration), and the Federal Circuit indicated at a recent hearing that Apple's patents at issue in the second California case were no good.

In connection with Apple not addressing the real claim construction issue (the jury instructions on infringement), Samsung's reply brief says: "That is Hamlet without the Prince." In a way, that saying also applies to the fact that Apple's patents-in-suit have such massive validity problems. And not only Apple's patents: the patents others assert against Apple don't appear to be significantly better. Apple and Samsung are the two top utilizers of the USPTO's new post-grant review procedures. It's really unfortunate that Apple advocates bad law, and bad interpretations of the law, instead of pushing for serious patent reform. I agree with Mark Cuban that Apple deserves a standing ovation for fighting the good fight with respect to encryption, but Apple has so far been fighting the opposite of the good fight with respect to patent quality, patent-eligible subject matter, and patent litigation rules (the latter with the exception of the UPC issue in Europe). Mark Cuban is indeed fighting the good fight in that regard.

I just don't understand why Apple takes a position on design patents that pretty much every other company in the industry disagrees with. Those who disagree with Apple can't all be habitual infringers of intellectual property rights.

The final section of Samsung's petition stresses the "enormous national importance" of the petition. This sounds to me like "this should be reviewed, but at the very, very, very least there should be a call for views of the Solicitor General (CVSG)." Or maybe I tend to read too much between the lines.

While I'm in the middle of tea-leaf reading, I'd like to also think about what the passing of Justice Antonin Scalia means for this particular case. This is not about politics (such as the question of whether the current president or his successor should replace him). Suffice it to say that my political positions are closer to his than those of the most liberal justices, and that's why I wouldn't want to suggest that conservative judges would be more likely to defend unreasonable outcomes such as the damages award in this Apple v. Samsung case. Nor do I mean to suggest that a conservative judge couldn't agree with Samsung on this matter: there are arguments and theories (such as the definition of "article of manufacture") that don't require anyone to be a "progressive" in order to side with Samsung, and conservatism and common sense do mix when applied by smart people. That said, a textualist and originalist like Justice Scalia would have been harder for Samsung to convince that the law of the smartphone should not follow from the law of the spoon, if the law of the spoon is technically still the law of the land.

Samsung's petition is on the agenda for the Supreme Court's March 4 conference. On the following Monday (March 7) we will then know what has been decided (or whether the decision has been postponed).

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Monday, February 8, 2016

Fair Standards Alliance welcomes [EU Competition Commissioner] Vestager’s comments on patent licensing

This here is a first for this blog: it's the first time I publish a complete press release without any my own commentary of my own. I don't know if and when I'll do so again, so please don't urge me to publish your press releases :-) In this case, the factual information contained in it is worth sharing, and I simply share the organization's perspective on this. I reported on the creation of the Fair Standards Alliance last year.

PRESS RELEASE: Fair Standards Alliance welcomes Vestager's comments on patent licensing

BRUSSELS, 5 February 2016 – The Fair Standards Alliance (FSA) welcomes European Competition Commissioner Margrethe Vestager’s statement that companies that have committed to license their standards-essential patents (SEPs) on fair, reasonable and non-discriminatory (FRAND) terms must be kept to that promise.

"We are delighted to see the Commissioner giving such a clear message that companies simply must license patents on the FRAND terms that they have committed to. This is very much in line with our view that something must be done about unfair and unreasonable SEP licensing practices," FSA chairman Robert Pocknell said.

In a speech to the College of Europe's Global Competition Law Centre on 1 February, the Commissioner also said guidelines can "be a more efficient way than cases to provide guidance and legal certainty," adding that formulating appropriate guidelines is much easier on the basis of the resolution of cases, and noting that the Commission's decisions in Motorola and Samsung as well as the European Court of Justice decision in the Huawei case have removed a lot of uncertainty.

The FSA's Pocknell said the Alliance would be pleased to constructively support further efforts to establish fair licensing conditions for SEPs, and will continue offering perspectives and recommendations on these matters.

The Europe-based association believes that unfair and unreasonable SEP licensing practices pose a significant risk to the innovation eco-system. The failure to abide by the FRAND commitment, existing in most standardisation licensing, creates barriers to entry for new market entrants, threatens to stifle the full potential for economic growth across major industry sectors, and ultimately harms consumer choice.

FSA's member companies, who hold more than 160,000 patents and spend more than 32 billion euros per year on R&D and innovation, include: BMW, Cisco, Dell, Fairphone, HP, Intel, ip.acess, Juniper Networks, Lenovo, Micromax, peiker acustic, Sierra Wireless, Telit, ublox and Volkswagen.

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Thursday, February 4, 2016

Apple to Supreme Court: Samsung litigation 'may be high-profile, [but] it is legally unexceptional'

Apple has just responded to Samsung's mid-December petition for writ of certiorari (request for Supreme Court review) regarding two legal questions concerning design patents and, in the same document, to amicus curiae ("friend of the court") briefs from major industry players, many IP law professors and various public interest advocates, all of whom agree with Samsung that the top U.S. court should take a look at this matter. Apple's lawyers from Wilmer Hale and Morrison & Foerster actually filed their opposition brief about two weeks ahead of a February 16 extended deadline, which is consistent with Apple's position at the end of its opposition brief that Samsung's petition should not "prolong" the #appsung dispute that began almost five years ago (this post continues below the document):

16-02 Apple Brief Opposing Cert Re. Design Patents by Florian Mueller

Looking at this from the angle of whether the case is worthy of a Supreme Court review (without getting defocused by arguments about the merits), I'm not overwhelmed by Apple's filing, but anything else would have been a major surprise. Honestly, this must have been one of the most difficult challenges ever for Apple's lawyers: to try to downplay the certworthiness of an issue after pretty much the entire ICT industry has made clear that it is profoundly concerned.

The hurdle for Apple to discourage the Supreme Court from taking the case is (although cert petitions are normally long shots) reasonably high here not only because of all the amici who support Samsung but also because the Supreme Court hasn't heard a design patent case in about 122 years. It's so obvious that a lot of things have changed during that period, and the role design patents play in connection with complex technology products really needs to be adjudicated again.

I'm not going to go into too much detail on that filing, but I'll quickly share a few observations:

  • As expected, Apple doesn't deny that the disgorgement of a company's entire profits over a design patent infringement could have major economic implications (and, by extension, a chilling effect on innovation).

  • Apple does, however, deny that there is a problem with design patent trolls:

    "The lack of concrete instances of 'design patent trolls' is unsurprising. Patent trolls may succeed in anticipating technological features and acquiring corresponding utility patents, but it is much harder to anticipate product designs before they are released—particularly given that innovative design companies typically give their products a unique look to differentiate their brand. Even if a troll anticipated what design patents might prove lucrative, it would be highly unusual for a design innovator to sell, assign, or license design rights to a troll. While a company might monetize unused utility patents through sale or license, it will typically keep its design rights to avoid giving away control of its brand."

    Those arguments would make sense in a world in which only narrow design patents are granted. However, in a world in which even single icons and rough screen layouts can be patented, I just cannot agree with Apple.

    Where Apple has a point is that it's not like design patent trolls are already a rampant problem. So far, design patents indeed appeared to have been of much less interest to trolls. However, if the Supreme Court allowed the Federal Circuit decision to stand, design patent assertions by patent trolls (and also by operating companies who use them for purposes that have nothing to do with protecting and controlling their brand) would become a major problem. It appears that the Apple v. Samsung ruling in question has already encouraged one non-practicing entity to threaten operating companies with the specter of total profit disgorgements. I don't have the slightest doubt that more of this is going to happen unless the Supreme Court restores sanity.

  • Apple's brief talks a whole lot about its success story and the company's undeniably transformative impact on the smartphone market. Between the lines, Apple is basically telling the Supreme Court that Samsung is just an infringer who wants to get away with wrongdoings; Apple also tells the court directly that it should ignore Google because it made Android, the operating system powering the devices in question. I don't think Apple will get too much mileage out of that: the amici supporting Samsung's petition are diverse and (most of them) disinterested enough that the Supreme Court can see one doesn't have to be Samsung or, in whatever way, a Samsung partner to take an interest in this matter.

  • While I can understand everything else Apple's lawyers are saying (because they just have to say it), there is one thing that comes up twice in the brief and which really doesn't make any sense to me: Apple says Samsung "appealed numerous issues, [but] did not challenge the validity of Apple's design patents.

    First, it's obvious that an appellant must set priorities, which is hard enough in such a complex case as this one. So if an appellant doesn't raise an issue, it doesn't mean there would have been no merit. Second, one part of Samsung's Supreme Court petition relates to claim construction, and claim construction informs (in)validity determinations. So Samsung is actually challenging validity, but at a strategically chosen level: I've read more than once in literature on appellate strategies in patent cases that claim construction (a matter of law) is far more easily reversed on appeal than factual determinations by a jury. Third, it's actually counterproductive for Apple to make that validity argument, given that its primary iPhone design patent, the D'677 patent, is indeed being challenged before the USPTO (with Samsung being the presumed anonymous petitioner), and the patent office found that one invalid last year. Apple asked the USPTO to modify its first Office action, but to no avail. Apple filed another petition for reconsideration last month. That reexamination is definitely not going well for Apple.

  • Let's go from the weakest part of Apple's petition to the strongest one: Apple points out very clearly that Samsung's support from amici is not as strong for its claim construction question as it is for the disgorgement issue. Apple notes (as I did in my post on the amicus briefs) that the 37 law professors supporting Samsung are the only group of amici to side with Samsung on design patent claim construction. Apple also notes that Oklahoma Associate Professor of Law Sarah Burstein, who had supported Samsung before the Federal Circuit with respect to design patent damages, decided not to sign her colleagues' Supreme Court brief because she fundamentally disagrees on the question of design patent claim construction (as she made clear in this PatentlyO guest post Apple also points the Supreme Court to).

    Those facts do suggest that design patent claim construction is of much less concern to industry than damages, and that Samsung's legal argument on claim construction may be somewhat more controversial than its position on disgorgement of entire profits. However, the number of law professors supporting Samsung has increased (from 27 to 37), and it's not hard to see why companies would be particularly concerned about outsized damages.

  • On the certworthiness of the damages question, I'd like to point to something interesting in Apple's filing but couldn't find such a thing.

  • Appe's argument is merits-centric as opposed to certworthiness-centric. I don't think Apple had much of a choice in that regard. But merits are not really the name of the game at the cert stage, and if the court accepts to hear the case, Apple will already have used some of its merits-related ammunition.

All in all, I would really be surprised if Samsung's petition didn't at least result in a CVSG (call for views of the Solicitor General so the U.S. government will talk to industry and find out how much of a concern there is). Apple's opposition brief has just added to my belief that at least the damages part of Samsung's petition is really very strong.

While I was looking at Apple's filing, I also saw the latest news of a non-practicing entity having been awarded more than $600 million in damages from Apple. This is an Eastern District of Texas jury verdict and the number will likely change before all is said and done, but every verdict of this kind increases the likelihood of Apple at some point joining the proponents of serious U.S. patent reform.

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Monday, February 1, 2016

As I suspected, the 2013 Nokia-Samsung patent deal is far from comprehensive: litigation still a possibility

In November 2013, Nokia and Samsung announced a five-year extension of an existing patent license agreement, with the financial terms left to determination by an arbitration panel. The scope was not announced, but back then, I expressed my belief that it was a license covering only (wireless) standard-essential patents (SEPs):

"I continue to believe it's a SEP-only license, including the 'additional' compensation."

Today, Nokia has announced that the arbitration result has a "positive financial impact" for its patent licensing division. Today's announcement explicitly states that this agreement has only a limited scope:

"This award covers part of the Nokia Technologies patent portfolio until the end of 2018. Nokia will continue to discuss with Samsung its other relevant intellectual property portfolios. Nokia has strong intellectual property assets consisting of intellectual property rights in the separate Nokia Technologies, Nokia Networks and Alcatel-Lucent portfolios, which include patents essential for a variety of standardized technologies as well as relevant implementation patents and proprietary technologies." (emphasis added)

See, I told you so. I remember a call I had with professional investors in late 2013 who told me they had spoken with Nokia's investor relations department and had concluded from their conversation that the deal was comprehensive. I told them I didn't believe so. I told everyone via this blog I didn't believe so. Now it's a fact.

While these two parties have so far been able to avoid going to court against each other, the above passage does mean that litigation (in the event they fail to reach an agreement) is still a possibility.

Nokia is the worst patent holder in this industry with respect to privateering. I've raised that issue in a couple of posts (see 1, 2). The fact that having a license from Nokia itself doesn't mean you couldn't still be approached by dozens of other entities monetizing Nokia patents probably makes negotiations between Nokia and potential licensees a lot harder than those talks used to be years ago.

The fact that most of Nokia's patent assertions against HTC failed (though HTC ultimately felt forced to take a license on whatever terms) may also make prospective licensees feel they should take their chances in court.

The next Nokia-Samsung announcement, whenever that one may issue, will most likely be a "fish or cut bait" statement. They won't be talking forever. At some point they will agree or Nokia will sue. I, for my part, would recommend to Samsung (if they asked me, which they obviously don't) not to overpay.

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