Earlier this week, the ITC decided to review a preliminary ruling that found Apple to infringe a Google/Motorola 3G-essential patent but postponed a decision on the next steps in the investigation of Motorola's complaint targeting Microsoft's Xbox 360 gaming console. The U.S. trade agency with quasijudicial authority set a new deadline for Mondy, July 2, but already made its determination today.
The judge's preliminary ruling held the Xbox to infringe four Google/Motorola patents, three of which are standard-essential patents (SEPs). Motorola's assertion of SEPs against Microsoft is reportedly being investigated by the Federal Trade Commission, the United States competition autority.
In the Xbox case, the Commission, the six-member decision-making body at the top of the ITC, did not ask the parties a long list of questions as in the Motorola-Apple case. Instead, it ordered a remand of the investigation to the Administrative Law Judge (ALJ). A remand is only ordered when an ALJ's initial determination has failed to consider potentially outcome-determinative legal issues. A remand doesn't necessarily result in a different decision, but in this case a modification of ALJ Shaw's initial determination to Microsoft's benefit is virtually certain to occur. The Commission's remand decision raises two questions, both of which are good for Microsoft:
ALJ Shaw is told to "apply the Commission's opinion in [the S3 Graphics v. Apple case]". I followed that case closely. The final outcome ("final" except that the HTC subsidiary appealed the ruling to the Federal Circuit) was a complete dismissal, despite an initial determination that identified a couple of infringements. In December, I blogged about a redacted version of the detailed Commission decision and explained that the ITC used this opportunity to clarify the boundaries of its mandate. Apple had defended itself against some of S3G's claims by arguing that the goods it was importing into the United States were not infringing, even though some potential infringement might have occurred post-importation.
The Commission furthermore asked ALJ Shaw to "rule on Microsoft's motion for partial termination of the investigation filed June 22 2012". I noticed and previously mentioned that motion, but its contents are unknown until a public redacted version becomes available. I suspect that it has to do with the FRAND issues raised by Google's use of standard-essential patents. In this context, Microsoft also pointed the ITC to the FRAND part of Judge Posner's recent landmark ruling, but Google disputes the relevance of Judge Posner's decision to this ITC investigation.
The ALJ has also been asked to set a new target date for the investigation. This remand causes substantial delay, and time is not on Google's side: in mid-November, less than five months from now, Microsoft's FRAND enforcement lawsuit against Motorola will go to trial in Seattle. The outcome of that litigation is going to be a license agreement on terms set by the court. Once Microsoft is licensed, there is no more scope of import bans. Since there will now have to be a new ALJ determination, which may easily take several months, followed by a Commission review and, potentially, a 60-day Presidential review before any import ban can enter into force, it's practically impossible that Google can actually get an ITC import ban before the Seattle lawsuit takes care of the standard-essential patents at issue in this investigation (all of the asserted patents with only one exception). Even with respect to the non-standard-essential patent (which Microsoft is presumably able to work around), the remand means that there won't be a U.S. import ban on the Xbox in 2012, including the extremely important Christmas Selling Season.
[Update] I've now (after blogging about the Galaxy Nexus injunction) finally been able to look at the implications of the remand notice more closely. On that basis, I have a strong feeling that Google's (Motorola's) case against the Xbox is in serious trouble and may go away now, as opposed to merely being delayed (though the delay is significant in and of itself, especially in light of the Seattle FRAND trial coming up in November). Here's why I think the remand notice may result in a new ALJ determination that will probably clear the Xbox of the alleged violations:
In light of the aforementioned S3-Apple decision I can't see how Microsoft would violate any method claims (patent claims on a method of doing something, as opposed to product claims) by importing the Xbox. The imported goods have to be infringing in order for the ITC to order an import ban. That's what helped Apple against S3G. In the Xbox case, the claims from three of the four patents the ALJ deemed violated are all method claims. Only the claims from the '094 patent, an allegedly H.264-essential patent, are device claims. It's not too speculative to assume that the Commission's remand is pretty much a suggestion to the judge to correct his error and throw out all method claims. In that case, only the '094 patent will be left.
I said before (and further above) that Microsoft's motion for partial termination (which I cannot yet access because it's confidential except for its headline) most likely relates to some FRAND issues. The '094 patent is undoubtedly a FRAND patent. Whatever the motion is (for example, it could correspond to the near-simultaneous filing Microsoft recently made in the Seattle FRAND litigation, arguing that Google as an MPEG LA licensee has a contractual obligation to grant a license to Microsoft), if it has to do with FRAND and H.264, then it's dispositive of the '094 patent. At some point I'll find out what the motion relates to -- either because a public version of the motion gets filed, or because of a public version of a pleading or order that references it. [/Update]
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