[Update] I have produced an unofficial translation of the court's press release. [/Update]
Apple scored a breakthrough court victory today against Motorola (Bloomberg was first to report). Its importance can hardly be overstated. This is so huge that it even begs the question of whether Google's strategy for its $12.5 billion purchase of Motorola Mobility has failed before the deal is even formally closed (they're still waiting for some regulatory approvals).
The Karlsruhe Higher Regional Court ("Oberlandesgericht Karlsruhe"), the appeals court within whose circuit the Mannheim Regional Court is based, decided today that Motorola Mobility is barred from further enforcement of its standard-essential patent injunction against Apple in Germany at least for the duration of the ongoing appeal (which I believe will take a year, if not more). And while today's decision is only a summary and preliminary decision that MMI could overturn during the course of the full-blown appellate proceedings, this indicates thatApple's appeal is highly likely to succeed -- and even if it didn't, Apple could realistically resolve the problem with limited additional concessions.
The appeals court summarily held that Apple has made an amended proposal for taking a license to MMI's patents on FRAND terms that should be acceptable to MMI, turning any further attempts to ban Apple's iPhone and iPad products into a violation of applicable antitrust law.
Earlier this month, the same court already ordered a first temporary suspension of the enforcement of MMI's standard-essential patent injunction. But that first suspension was only meant to bar further enforcement while the appeals court was evaluating the parties' arguments related to Apple's motion for a suspension for the duration of the appellate proceedings. It was a suspension only for a few weeks, but today's suspension is going to be in effect for the entire duration of the appeal.
Three weeks ago I explained Apple's iterative approach: Apple repeatedly amended its proposal to MMI in order to address any remaining concerns on the parts of judges. Apple knew that MMI was always going to find something to grouse about, but it needed to find out at which point the appeals court would conclude that enough is enough and tell MMI that refusing to accept this proposal is, at least based on the court's preliminary finding, an antitrust violation.
Today's ruling by the Karlsruhe Higher Regional Court will affect certain upcoming FRAND-related decisions to be taken by the Mannheim Regional Court, which has recently been on a quest for new ways to weaken the FRAND defense. On the basis of today's order from Karlsruhe, a Mannheim decision scheduled for mid-April will most likely work out in Apple's favor as far as the same standard-essential patent is concerned.
The rationale behind today's decision lends further credibility to the EU antitrust complaints that Apple and Microsoft brought against Motorola Mobility.
Motorola was hoping to gain near-term leverage against Apple and Microsoft through the aggressive pursuit of injunctive relief based on standard-essential patents. Google, which was totally in agreement with MMI's litigation strategy, was hoping to buy that leverage for $12.5 billion, and Germany was a key part of that plan because its legal system places a relatively high burden on implementers of standards invoking the FRAND defense. In fact, Google's public statement on the post-acquisition use of MMI's patents proposed the German approach to FRAND as the way forward for the whole world. With today's ruling, Googlorola's strategy has failed even before the companies have formally merged. This is such a major blow to Google's patent strategy that, from a mere shareholder value point of view, it should now give serious consideration to the possibility of coughing up the $2.5 billion break-up fee agreed upon with MMI's board of directors and walk out on this deal. After all, that $2.5 billion payment would be an affordable subsidy for the only totally Google-aligned company among the major handset makers. But in all likelihood, Google will nevertheless try to close the deal, if only to avoid a colossal embarrassment for its CEO and other decision-makers.
MMI is now in a tricky situation. The Karlsruhe Higher Regional Court has formally alerted it to the fact that its refusal to accept Apple's offer -- which from an antitrust point of view is now apparently too good to refuse -- is a potential antitrust violation. By continuing not to accept Apple's proposal, MMI risks consequences that could include fines from the European Commission.
It's a funny coincidence that this important decision comes on the first day of Mobile World Congress 2012.
Just to make sure there are no misunderstandings here: MMI's other German injunction against Apple, which is also being enforced and has obligated Apple to deactive certain push notification services in Germany, is not affected by this ruling in any way. That injunction is not based on a standard-essential patent. That's why its enforcement doesn't raise FRAND issues, but it's also why that one isn't nearly as devastating as the one based on a standard-essential patent. Deactivating push notifications is a somewhat inconvenient option - but a phone that can't connect to the wireless networks isn't salable at all. And that's exactly why antitrust law must prevent the abuse of patents that cannot be worked around only because they cover a mandatory part of a standard (the same patents could be worked around before they make their way into a standard).
[Update] I have produced an unofficial translation of the court's press release. [/Update]
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