In the context of Friday's dismissal of a Japanese Apple lawsuit against Samsung, I mentioned (as I previously did on other occasions) that the problem of the Android camp in general and Samsung in particular is that they can't score meaningful offensive wins against Apple. Fending off patent lawsuits is not enough when facing a company with a fast and large-growing portfolio of relevant patents. Defensive wins merely delay the inevitable.
What Samsung needs are enforceable injunctions over impactful non-standard-essential patents. Thus far, Samsung hasn't won any injunction of that kind. It previously relied largely on standard-essential patents (SEPs), and a Korea Times report published on Friday suggests that Samsung is once again contemplating a multijurisdictional push for preliminary injunctions against a new iPhone (or iPad 4G):
"Samsung confirmed that it will immediately sue Apple if the latter releases products using advanced long-term evolution (LTE) mobile technology."
It tried this trick last year with 3G patent assertions against the iPhone 4S, with a hit rate of zero. I would strongly discourage Samsung from trying to use 4G/LTE-essential patents to shut down the iPhone 5. It won't improve Samsung's position. It will only make things worse, especially with antitrust regulators. In my view, the reasonable approach for Samsung would be to sue for FRAND royalties over its SEPs, not injunctions.
The Korea Times article cites research according to which Samsung owns the world's third-largest 4G/LTE portfolio. But the size of a portfolio related to a given standard is only indirectly relevant if someone seeks injunctions over SEPs. As an expert report filed with different courts by now-Google-subsidiary Motorola Mobility noted, "it only takes one bullet to kill".
Obviously, the larger a portfolio is, the more likely it is to contain truly essential patents, as opposed to merely declared-essential patents. But Samsung's unsuccessful 3G enforcement campaign against the iPhone 4S failed primarily because of licensing issues. The other respect in which a large portfolio of patents specific to a given standard can help is that a larger portfolio typically (unless there are serious validity or essentiality issues) entitles a patent holder to a higher royalty rate. The reasonable royalty rate is a factor to some courts who look at whether the implementer of the standard was made a FRAND offer. But even with 12% of all 4G/LTE patents, Samsung can't claim a 2.4% royalty on Apple's products. If you extrapolate this percentage to the entirety of 4G/LTE patents, Apple would have to pay 20% of its sales -- tens of billions of dollars a year -- to the collective owners of 4G/LTE patents. That's still far out of the FRAND ballpark.
It's not just the percentage Samsung asks for but, especially, the royalty base. I explained that issue on previous occasions, such as this post on one of Apple's pre-trial filings with Judge Koh's court. The proper royalty base would be a fully-licensed baseband chipset, or at the most a cheap feature phone, just like a jalopy and a sports car pay the same highway toll, as Apple noted in a letter to U.S. lawmakers. Also, Samsung won't get 2.4% of the price of an airplane if it comes with on-board 4G/LTE functionality.
Patent exhaustion is also going to be a big issue. From what I heard, the iPhone 5 will come with a Qualcomm baseband chip. Qualcomm and Samsung have a patent license agreement in place. Samsung tried to terminate it with respect to Apple as a third-party beneficiary (Motorola, advised by the same lawyers, tried the same thing). But in some jurisdictions, Samsung's push for injunctions against Apple devices incorporating Qualcomm baseband chips failed just because that termination theory was rejected, especially in light of Samsung's promise to grant irrevocable FRAND licenses to its SEPs. I don't know the Samsung-Qualcomm agreement but most likely it won't make a distinction between 3G and 4G patents as far as termination is concerned -- and participants in 4G/LTE standard-setting also had to promise to grant irrevocable FRAND licenses.
Should Samsung really try to get the iPhone 5 banned over 4G/LTE SEPs, it will have to find at least one jurisdiction of economic relevance in which it can surmount all of the following hurdles in addition to the usual requirements for patent enforcement (validity, infringement) and potential claims that it failed to disclose its patents and patent applications on a timely basis:
the contractual implications of its own FRAND pledge
Qualcomm-related patent exhaustion-like issues
antitrust issues (in court as well as blowback from regulators -- the European Commission is already investigating Samsung's related conduct)
Let's now look at the situation in different jurisdictions. It's clear that the only country in which Samsung is reasonably likely to succeed is Korea. Other countries are, at best, a gamble.
North America
In the United States, earlier disputes over SEPs were settled before any precedent that could be useful to Samsung was set. Recent decisions by judges in four different federal districts strengthened the rights of good-faith implementers of standards. The most notable one is also the one that most specifically addresses injunctive relief: the FRAND-related part of Judge Posner's dismissal of a two-way Apple-Motorola lawsuit in Chicago. While not specific to injunctive relief, summary judgment decisions in Wisconsin and Washington (state) strongly support a FRAND-related contract-based defense. In the Northern District of California, Judge Koh allowed Apple to take most of its FRAND counterclaims to trial against Samsung. The jury verdict didn't support Apple's counterclaims, but juries don't make law and have at the most an advisory role in connection with equitable defenses which are decided by judges. The jury dismissed Samsung's SEP assertions on two grounds, either one of which would have been sufficient on its own. The patents were not demeed infringed, and if they had been deemed infringed, the jury sided with Apple on patent exhaustion (interestingly, only Intel chips were at issue, and from the outside it appears that Apple's patent exhaustion argument is stronger in connection with Qualcomm than with Intel).
Furthermore, U.S. antitrust regulators don't take FRAND abuse lightly. Officials from the Federal Trade Commission and the Department of Justice spoke out on injunctive relief (particularly in the form of import bans) over SEPs at a recent Senate hearing. Also, the FTC filed a pretty clear statement with the ITC.
I'm unaware of similar cases in Canada. That country has a common law system, which means that principles of equity will be considered before injunctive relief is granted. This is speculative, but Judge Posner's reasoning on FRAND (which is very general in nature and not specific to U.S. law) could be quite persuasive in all English-speaking common law jurisdictions.
Europe
With the ongoing European Commission investigations, Europe is the last continent on which it would make sense for Samsung to sue. All of Western Europe's large economies are EU member states. But there are rumors that Samsung is nevertheless looking at Europe as a priority region for 4G/LTE SEP enforcement against the iPhone 5.
In Mannheim, Germany, Samsung has a couple of trials over 3G/UMTS SEPs coming up this month. Theoretically, their outcome could also have an impact on the iPhone 5 (at the trials I hope to learn about the scope of the injunction Samsung is seeking). Its previous three Mannheim lawsuits against Apple all failed because Samsung couldn't prove actual infringement. Motorola was more successful on the infringement side, but it turned out last month that the Google subsidiary ultimately felt forced to grant Apple a wireless SEP license, the financial terms of which have to be sorted out in court (they just agreed on an unspecified FRAND rate). If Apple was able to deal with Motorola's SEP assertions in Germany, it will also find a way to deal with Samsung's attacks within the Orange-Book-Standard framework. Apple never has a problem with paying FRAND rates, as long as FRAND really means FRAND.
In some parts of Germany, especially in the circuits the courts in Mannheim (primary venue for SEP lawsuits) and Düsseldorf (second most popular venue for this) belong to, preliminary (as opposed to permanent) injunctions are generally unavailable over patents that have not been defended in a contentious proceeding (reexamination or nulity action). In Munich, such untested patents can result in preliminary injunctions, but it doesn't take too much doubt over the validity of a patent to fend off a preliminary injunction motion. Also, SEP holders generally don't sue in Munich, presumably because they feel the FRAND defense is weaker in Mannheim and Düsseldorf.
In the Netherlands, Samsung's 2.4% royalty demand was considered to be far outside of the FRAND ballpark. As a result, injunctive relief was ruled out even before the court looked at infringement and validity. One Samsung 3G/UMTS SEP was actually deemed valid and infringed, but Samsung is only entitled to what will be a modest sum, and the same ruling indicated that Apple is fine as far as its products incorporate Qualcomm baseband chips.
In France and Italy, Samsung's preliminary injunction requests against the iPhone 4S were turned down by courts in Paris and Milan. In both cases, the decision was primarily based on Qualcomm-related exhaustion issues, but both courts also had a fairly FRAND-friendly inclination.
In the UK, it's generally very hard to win patent injunctions. Most patent assertions don't even result in a finding of liability because the High Court of England and Wales tends to consider more patents invalid than its counterparts in other European countries and also takes a conservative position on infringement questions. Even if there is liability, there still isn't necessarily an injunction. A few months ago, SEP assertion entity IPCom received a clear indication from the court that it wouldn't be able to win an injunction against Nokia. Even prior to that, trying to get products banned in the UK over SEPs would have been a long-shot proposition. And now, even more so.
Last year, Huawei filed a lawsuit in (among other countries) Hungary against ZTE, apparently also involving 4G patents, but no outcome is known.
Apple and Samsung already have some design rights matters pending in Alicante, Spain, where the EU agency administering Community designs (EU-wide design patent equivalents) is based. If Samsung brought a SEP infringement action in Spain, it would probably alienate European Commission Vice President (and competition commissioner) Joaquín Almunia, a Spaniard who is personally very concerned about the overall FRAND abuse situation.
There are literally dozens of other Europan countries, and while none of them represents a huge market, some of them have affluent populations. We'll see if Samsung is going to enter unchartered SEP litigation territory. Even if it won an injunction in some smaller European country, it's likely that Apple wouldn't lose much of its sales opportunity because the resellers based there would just simply purchase the iPhone 5 in other EU member states (no customs duties within the EU's single market). Samsung could try to put pressure on retailers, but that's difficult to do and could affect its own sales.
Asia
South Korea is the only country in the world in which Samsung has been able to win an injunction against Apple so far, even two of them at the same time, and to add insult to injury, both over SEPs. Those two injunctions appear likely to be stayed for the time being and relate to products that do not come with Qualcomm chips. What is known about the ruling was markedly sympathetic to Samsung's arguments, but Samsung also has to think about the political implications of turning its country into a FRAND rogue state.
I don't know about SEP injunctions in Japan. Last year the Wall Street Journal reported on a Samsung announcement of a motion for a preliminary injunction against the iPhone 4S in that country, but I never heard about the iPhone 4S actually being banned there.
China is probably the most interesting country worldwide in which Apple and Samsung are not yet known to be suing each other. But there are various reasons to doubt that Samsung would succeed there. China has traditionally limited the exclusionary use of patents through compulsory patent licenses. I understand that the Chinese patent office has some authority in this regard. Also, the Chinese Ministry of Commerce (MOFCOM) was genuinely concerned about Motorola's use of SEPs in its protracted merger review. And Apple's gadgets are built there.
India generally has a reputation of weak patent rights.
Australia
A two-way Apple-Samsung trial is sort of ongoing there, though it appears that it will take months before any kind of decision. A Bloomberg report on one of the trial sessions indicates that a federal judge called a dispute over "wireless transmission technology" (i.e., wireless SEPs, as opposed to Apple's technologies) "ridiculous" and felt that mediation (to set a royalty rate) was the appropriate next step. An injunction against Apple over wireless SEPs in Australia appears unlikely, and a preliminary injunction (or temporary restraining order) is even less likely.
Rest of the world
I previously focused mostly (even if not exclusively) on jurisdictions in which Apple and Samsung already have litigation pending. There are still some countries I didn't address. For example, two of the BRIC countries, Brazil and Russia weren't mentioned. I don't see an obvious reason why the courts in those countries would adopt the Korean stance as opposed to the European and North American line. Also, one country in which technology companies file for lots of patents, but so far don't sue, is South Africa. And since I mentioned Australia, I might also mention that New Zealand is currently reforming its patent system.
Maybe Samsung will surprise us and really find a place to sue that nobody thought of. But if it really wants to gain massive leverage over Apple, it will have to focus on the places I discussed. For the vast majority of Apple's customers on this planet, Samsung's 4G/LTE-essential patents most likely won't have an impact on the availability of the iPhone 5.
If you'd like to be updated on the smartphone patent disputes and other intellectual property matters I cover, please subscribe to my RSS feed (in the right-hand column) and/or follow me on Twitter @FOSSpatents and Google+.
Share with other professionals via LinkedIn:
