Lawmakers, regulators, standardization bodies address abuse of standard-essential patents

In June 2012, European Commission Vice President Joaquín Almunia said that, in addition to regulatory efforts to counter the abuse of FRAND-pledged standard-essential patents (SEPs), courts and standard-setting organizations (SSOs) also need to contribute to solutions. More than a year later, there is indeed momentum on multiple fronts behind efforts to hold companies to their FRAND promises and to ensure that industry can rely on FRAND pledges. This post is an update on positive developments in politics, antitrust enforcement and standardization.

Chairman Goodlatte's draft patent bill contains SEP-specific pleading requirement

Earlier this week the Chairman of the Judiciary Committee of the United States House of Representatives, Bob Goodlate (R-Va.), released his second patent reform discussion draft. Unsurprsingly, there are lobby groups for whose purposes the bill doesn't go far enough.

Patently-O published the proposal. On page 5 of that document, starting on line 9, there's a proposal for an additional pleading requirement (the Goodlatte draft proposes a number of new requirements) concerning SEPs:

"(10) [Identify] [f]or each patent[-in-suit], whether such patent is subject to any licensing term or pricing commitments through any agency or standard-setting body."

While this requirement per se doesn't prevent abuse and is, at first sight, nonjudgmental, I still consider it helpful. If this was ultimately adopted, it would presumably be the first time that the patent law of any country in the world recognizes the fact that SEPs raise specific issues in enforcement. It doesn't say what those issues are; it doesn't say how to deal with them. But the existence of a pleading requirement would, in and of itself, support the position that SEPs are a special category of patents from an enforcement point of view.

At the recent Federal Circuit hearing in the "Posner appeal", Apple's lead counsel, Orrick's Joshua Rosenkranz, told the appeals court that pple and Motorola "occupy completely opposite ends": on the one hand, there are the "distinctive" patented features with which Apple "revolutionized" wireless devices and Apple's "exclusivity"-centric approach of not licensing those patents "in general" to anyone, much less competitors, and on the other hand, Motorola's patents-in-suit, which relate to standards and which it promised to "license universally to everyone". While this distinction is accurate and appropriate, it's based on contract law, antitrust rules, business logic and principles of innovation policy, but statutory patent law does not make or recognize this distinction at present. If Chairman Goodlatte's proposal was adopted, then there would also be at least a strong indication in statutory patent law that SEPs must be treated differently from non-SEPs.

SEP-specific questions raised by FTC inquiry into patent troll industry

Three months ago I already expressed skepticism concerning the FTC's Section 6(b) investigation of patent assertion entities (PAEs). So far there's no indication, much less evidence, that there are actually antitrust issues in that area. Not all bad stuff that happens in business is a violation of antitrust laws.

This week the FTC formally launched its inquiry and published a request for public comment on proposed information requests to PAEs. For the reason I gave in the previous section, I like the fact that special attention is given to SEP assertions. On page 4 of the document, the term "Standard-Setting Organization" (or "SSO") is defined as "any organization, group, joint venture or consortia that develops standards for the design, performance or other characteristics of products or technologies". On page 5, subsection o specifies SEP-specific information on PAE patents that the FTC plans to request:

o. whether the Patent (or any claims therein) is subject to a licensing commitment made to a Standard-Setting Organization and specify:

(1) all Standard-Setting Organizations to which a licensing commitment has been made;

(2) all standards to which such a licensing commitment applies;

(3) the Person(s) who made the licensing commitment;

(4) the date(s) on which the licensing commitment was made;

(5) all encumbrances, including, but not limited to, all commitments to license the Patent or any of its claims on reasonable and non-discriminatory (RAND), fair, reasonable, and non-discriminatory (FRAND), or royalty-free (RF) terms[.]

I don't like at all what certain non-practicing entities are doing with FRAND-pledged SEPs. For example, I'm a long-standing critic of certain aspects of InterDigital's demands and enforcement strategies.

But SEP-wielding NPEs ultimately just want to get paid. Some of them demand way too much money, and they seek unfair leverage to force others to accede to their demands. Still, they are sincere in their desire to conclude a license deal. That's more than operating companies that act as SEP trolls can say. Those make purely prohibitive demands for a SEP license because their real objective is a comprehensive cross-licensing involving non-SEPs. In my view, that should be a higher antitrust enforcement priority than SEP-owning NPEs.

The European Commission is focused on abusive conduct by large players, though I wouldn't be surprised to see EU investigations of certain SEP-holding NPEs at some point as well. An antitrust hearing in the EU investigation of Google's (Motorola Mobility's) SEP assertions against Apple in Germany will, according to what I was told on Twitter, be held on Monday, September 30. I did a fair amount of work in Brussels over many years and have some good contacts there. I'll try to find out more about this.

On Friday Vice President Almunia gave a speech at Fordham's Competition Law Institute Annual Conference in New York and mentioned that "Samsung has sent [the Commission] a set of commitments seeking to address [its] concerns" and announced a market test: "We will formally market test these proposed commitments with other market participants in the coming weeks." (That's what the Commission has to do unless it settles cases without formal remedies.)

Proposed IEEE Standards Board Bylaws would provide far greater clarity than previous SSO FRAND policies and pledges

The IEEE (Institute of Electrical and Electronics Engineers) told the Federal Circuit last year that courts should not rely on standards bodies to "take a direct role in enforcing patent commitments". But SSOs can play a role in preventing abuse relating to future standards, and the IEEE appears to be making a very serious effort in that regard.

This webpage contains to links to an August 2013 IEEE-SA Standards Board Bylaws draft and to comments from key companies involved with the process (two different documents; the difference is just in the sorting order, not in the content). Under the U.S. eBay standard, it would be extremely difficult to obtain injunctions if the following sentence (lines 126-128 of the draft bylaws) was adopted:

"A Submitter of an Accepted [Letter of Assurance] who has committed to license Essential Patent Claims on reasonable terms and conditions that are demonstrably free of any unfair discrimination has implicitly acknowledged that a royalty is sufficient compensation for a license to use those Essential Patent Claims."

This is a rather clear way of putting the debate over "(in)adequacy of monetary relief" to rest with respect to future IEEE standards. I discussed this less than two weeks ago in connection with Commissioner Wright's antitrust-minimalist position on SEP-related matters. In my view, the adequacy of monetary relief can be determined the way Judge Posner did even without FRAND pledges containing an explicit admission to that effect. But the clearer, the better (obviously, it could be stated even more clearly than the IEEE draft proposes).

For a round-up post like this there's far too much in the draft bylaws and in the comments for me to cover comprehensively right here and now. The draft bylaws would limit the pursuit of injunctive relief to only certain circumstances (which could be defined more narrowly, but at least there isn't the vague notion of an "(un)willing licensee").

The document containing comments from industry players (with many of the usual suspects being particularly active) is worth reading. Maybe I'll do a separate post on the IEEE debate at some point.

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Pressure remains on HTC after preliminary ITC ruling: UK trial coming up, Italian lawsuits filed

Nokia has been litigating against HTC for 17 months. Slowly but surely, it seems that even HTC's outstanding defensive skills and stalling tactics won't enable it to go on for too long without a license to some of Nokia's non-standard-essential patents (it already has a SEP license).

On Monday, a preliminary ruling on Nokia's first ITC complaint against HTC held the latter to infringe two wireless (but non-standard-essential) Nokia patents. Those findings are subject to a Commission review, and the final ruling could be different, but it's not easy to do away with two infringement findings at the same time.

In the investigation of Nokia's second ITC complaint against HTC, another Administrative Law Judge decided last month that Nokia was allowed to reassert a patent that HTC's stalling tactics got removed from the earlier-launched investigation. Today a public redacted version of that order became available. The short version of the story is that HTC persuaded the ITC to refer that patent to arbitration, capitalizing on a low legal standard (a claim of arbitrability just has to be a little bit less ridiculous than "wholly groundless"), but it later derailed the arbitration proceeding and instead filed a declaratory judgment action in the UK. All of this is creative, but it was too much for the taste of the ITC judge in charge of the second investigation (ALJ Theodore Essex), whose order makes clear that he's got HTC and its stalling tactics figured out:

"The conduct taken by HTC in this series of events cannot be tolerated -- HTC removed the '529 Patent from litigation in order to submit the dispute to arbitration, yet it ultimately decided not to continue with arbitration and instead chose to pursue litigation. HTC cannot now seek to delay this litigation by arguing, yet again, that the only proper venue to resolve the dispute surrounding the '529 Patent is arbitration."

"[T]he ALJ finds it disingenuous of HTC to argue that Nokia is 'required' to seek arbitration, but then to hold such a 'requirement' to be Nokia's own fault and of Nokia's own doing."

This is like saying, "I didn't just fall off the turnip truck".

The first quote above mentions a UK action. HTC brought a number of declaratory judgment actions in the UK, and Nokia responded with offensive (infringement) counterclaims. I found out that a UK trial over some patents is scheduled to begin on October 7. I will try to find out more as things progress there.

The U.S. (where Nokia brought not only those two ITC complaints but also federal lawsuits in the District of Delaware and the Southern District of California), the UK and Germany (where lawsuits were filed in three different regional courts) are not even the only jurisdictions in which Nokia is asserting its rights against HTC. Nokia's statement on Monday's preliminary ITC ruling (quoted in an update at the end of my post on the decision) mentioned that one of the patents Judge Pender found valid and infringed is also at issue in, among other venues, Rome, Italy. So far this blog has reported on only one decision (technically two rulings over two different patents, but practically the same issues) made by an Italian court: the January 2012 dismissal of a SEP-based preliminary injunction request by Samsung against Apple. Samsung had sued in Milan. Prior to Nokia's statement I had never heard of a patent infringement lawsuit in Rome, though. Today I found out a little bit more. There is a court in Rome that has a division ("Nona Sezione Civile", i.e., "9th Civil Division") that hears, inter alia, patent cases ("brevetti" means "patents"). Italy is a large market, so if Nokia won one or more cases there, it would gain some additional leverage to whatever it may achieve in the U.S. and Germany -- unless HTC elects to take a license in the meantime, of course, which is the inevitable outcome.

So far I've found out about two Nokia v. HTC lawsuits in the Eternal City: one about EP1133831 on a "method and arrangement for transmitting and receiving RF signals through various radio interfaces of communication systems", the European equivalent of U.S. Patent No. 7,415,247, which is one of the two patents Judge Pender found infringed earlier this week, and another one about EP0998024 on a "modulator structure for a transmitter and a mobile station". I understand that EP'024 will be at issue, among others, at the London trial scheduled to begin on October 7, and that both patents asserted in Rome will go to trial in Düsseldorf, Germany, in early 2014.

There are certainly reasons to assume that a license deal will happen before the end of the year. But I can't rule out that those Düsseldorf trials will have to be held, in which case I'll attend at least some of them.

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U.S. government shutdown over budget impasse would delay Google's ITC appeal against Apple

In light of uncertainty surrounding the U.S. government's ability to operate after Monday (September 30) due to a budget impasse in Congress, the United States International Trade Commission (USITC, or just ITC) today filed a contingent motion with the United States Court of Appeals for the Federal Circuit, requesting in the event of a government shutdown a postponement of a Motorola v. Google appellate hearing scheduled for October 11. At that hearing, the ITC and intervenor Apple will defend the U.S. trade agency's August 2012 finding that Apple did not infringe three Motorola patents against Google's (Motorola's) appeal.

Only one of the three patents tossed by the ITC last year is at issue on appeal: U.S. Patent No. 6,272,333 on a "method and apparatus in a wireless communication system for controlling a delivery of data", which according to Google's lawyers "solves the critical problem of controlling the effective delivery of data to applications on a wireless device". Google (Motorola) is pursuing, on the basis of claim 12 of this patent, an import ban. The exemplary accused devices in the investigation are the iPad 3G, iPad 2 3G, iPhone 3GS, and the first-generation iPhone, but the scope of an ITC exclusion order would not be limited to those products: any other Apple smartphone or tablet infringing the patent would also be excluded.

Apple and Google understand the ITC's situation. The ITC argues that its counsel "will not be authorized to represent the Commission should a shutdown occur". Possibly, its counsel could not even "attend the oral argument should the shutdown extend through October 11, 2013". In any event, a shutdown starting Tuesday would affect "counsel's ability to adequately prepare for the argument". For as much as Google would like its appeal to be adjudicated sooner rather than later, it has to accept this reality.

Here's the ITC's contingent motion (this post continues below the document):

13-09-27 ITC Motion to Reschedule Motorola-Apple Appellate Hearing by Florian Mueller

This is only the first of two appeals Google's Motorola brought against the ITC's determinations on its complaint against Apple. In May 2013 Google also appealed the dismissal of another patent-in-suit, which relates to the use of a proximity sensor.

Apple's appeal of the ITC's dismissal of its case against Motorola succeeded in very significant parts last month. Earlier this month Google then asked the Federal Circuit to reconsider its decision at a panel rehearing or even in the form of a full-bench review. The court invited Apple to submit a response, which it did yesterday. Apple counters Google's various arguments for a rehearing by saying that the petition for a rehearing is largely based on arguments it failed to make while it had the opportunity. I have uploaded Apple's filing to Scribd. I said before that I doubt Google will win a rehearing (these are rare), but I thought it did raise an interesting point when it proposed a claim-by-claim analysis of market success of an invention (a secondary consideration of non-obviousness). Apple explains now why it doesn't consider this reasonable, but I still believe that if any question raised by Google in its petition appears interesting, it's this one.

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Video of Steve Jobs's iPhone presentation kills Apple's photo gallery touch patent in Germany

Steve Jobs is a named inventor of more than 300 Apple patents, and when he presented the original iPhone in January 2007, he said, "boy have we patented it!"

But Apple forgot about an important difference between U.S. patent law at the time and the patent laws of the rest of the world, especially Europe. In the United States in the pre-America Invents Act days, innovators had a twelve-month grace period to file for inventions after making an invention, and during those twelve months nothing that anyone would show publicly or publish would be eligible as prior art. In Europe, however, there never was such a grace period for patent applications, and even an inventor's own public demos could always be held against his own patents if they took place before the filing of an application. Even now, with the AIA in force, U.S. patent law has an exception in place for pre-filing disclosure by the inventor (35 U.S.C. 102(b)(1)(A)). Europe has always been stricter.

As a result of this difference between jurisdictions, the Munich-based Bundespatentgericht (Federal Patent Court of Germany) today sided with Samsung and Google's Motorola Mobility in declaring an Apple iPhone patent, EP2059868 on a "portable electronic device for photo management", invalid within the borders of Germany because a video of the original January 2007 iPhone presentation already showed the famous bounce-back effect in the photo gallery, which is what this patent is all about. The court also rejected various amended claims proposed by Apple, which were an attempt to distinguish the patent from what was shown in the video, because it found them to be, at best, obvious over the Steve Jobs video, which Google's lawyers from the Quinn Emanuel firm submitted to the court in April 2013. In other words, even an amended version of the patent would be trivial, but not over what others created before -- only over Apple's own public demo.

This is a member of the rubber-banding patent family. The rubber-banding patent itself was affirmed by the United States Patent and Trademark Office in June and is subject to an opposition proceeding before the European Patent Office, where Samsung and Google are challenging it and may very well defeat at least some if its claims based on the Steve Jobs video. The photo gallery patent is narrower than the general rubber-banding patent. It claims mostly the same priority dates, and the relevant priority date for the purposes of the German nullity case is in late June 2007 -- five months after the original iPhone demo. Earlier today I applauded Google for promoting, as part of a broadbased industry coalition, balance and rationality in connection with the rules of procedure of Europe's future Unified Patent Court, and I congratulate its lawyers on having presented the outcome-determinative prior art reference to the Federal Patent Court of Germany in the photo gallery case. For jurisdiction-specific reasons I'll explain further below, today's victory over the photo gallery patent is not only appealable but, more importantly, paves the way for successful assertions by Apple of a rubber-banding utility model against Samsung (that case was stayed in Mannheim but could be resumed soon), Motorola Mobility, and other Android device makers.

The Steve Jobs video was shown in open court but only on a laptop close to the bench. The critical part must be what you can see around 33:40 in the following YouTube video:

Apple had won a Dutch preliminary injunction over this patent against Samsung in August 2011 (affirmed in November 2012) and a Munich injunction against Motorola Mobility in March 2012 (a couple of months before the closing of its acquisition by Google), and a case against Samsung was stayed by the Mannheim Regional Court pending this nullity proceeding. The Mannheim court predicted the right outcome for the wrong reasons: as it deemed highly probable, the Federal Patent Court indeed declared the patent invalid, but not based on the prior art evaluated at the time of the infringement ruling.

When the Presiding Judge of the Second Nullity Senate, Judge Vivian Sredl, opened the hearing in the morning, the court's inclination, outlined in detail by another member of her panel, was to invalidate this photo gallery bounce-back patent due to anticipation by at least one prior art reference, "Lira" (PCT Publication No. WO 03/081458 on "controlling content display", by AOL/Luigi Lira, published on October 2, 2003), and probably also a second one, "LaunchTile" (a study sponsored by Microsoft in the middle of the last decade; video, article). The parties had been aware of the court's thinking for several months. The court's inclination upped the ante for Apple. If a patent is deemed to have been non-novel at the time of filing, the patentee has to overcome not only this assessment of anticipation but also prove an inventive step. I considered the Federal Patent Court's preliminary opinion exceedingly strict. While in favor of high patent quality, I thought that this stretched the concept of anticipation: at most, there was a question of (non-)obviousness in my view.

Apple, represented by two Bardehle Pagenberg patent attorneys (Johannes Lang, who had prosecuted the application, and Dr. Christof Karl, who is also an attorney-at-law litigating infringement cases) who were joined by Freshfields Bruckhaus Deringer IP litigator Dr. Markus Gampp, accepted -- and mastered -- this challenge. After several hours, the court agreed with Apple that the photo gallery patent -- except for its claim 1 -- was novel and inventive over "Lira" and "LaunchTile". While Judge Sredl did not refer to those prior art references when she announced the ruling in the late afternoon, I believe the court's written decision will be favorable to Apple in this regard. The patent will still be deemed invalid as granted and as amended because of the Steve Jobs video, a holding that Apple can appeal (as a matter of right) to the Bundesgerichtshof (Federal Court of Justice). But in the greater scheme of the smartphone patent disputes, Apple's achievements with respect to "Lira" and "LaunchTile" are very relevant, even though less than outcome-determinative today.

In addition to the rubber-banding and photo gallery European patents, Apple also obtained a super-comprehensive utility model, Gebrauchsmuster DE 21 2008 000 0001, which it registered with the German Patent and Trademark Office. German utility models are sort of second-class patents: they are valid for only ten years, and they are not examined. Apple asserted it against Samsung, which instigated a revocation proceeding before the German patent office. The Mannheim court stayed the case. Since utility models don't undergo any examination, they don't enjoy any presumption of validity until they survive a challenge (in all of the smartphone patent cases I have watched, only one patent granted by the European Patent Office has been found valid by the Federal Patent Court of Germany on a preliminary basis -- a Microsoft patent on multilingual computer programs -- and only one other patent survived in an amended form -- a Microsoft patent on an event management architecture; but at least there is some examination, even if it results in a majority of patents that are invalid as granted).

There are other differences between utility models and patents, and one of them limits the eligibility of prior art. Samsung and Google (and potentially other companies worried about Apple's utility model) can't hold the Steve Jobs video against it because German utility models enjoy a Neuheitsschonfrist (novelty grace period) of six months for prior public disclosure by the patentee. Also, prior art is limited by territory, though the worldwide availability of a YouTube video might overcome that hurdle.

The German patent office has not yet ruled on Samsung's challenge to this utility model. Apple can still inject into the proceedings one or more amended claims that cover what the photo gallery patent claims. The iPhone presentation video won't count because it just about falls within the novelty grace period. Samsung will have to rely on other prior art, and its best-case prior art references are Lira and LaunchTile, of which Apple convinced the Federal Patent Court today that those don't render the photo gallery patent invalid. The Federal Patent Court reviews any determinations by the German patent office. The German patent office will most likely treat the Federal Patent Court's opinion on the photo gallery patent as binding case law for the purposes of the utility model revocation proceedings; if not, Apple can always ask the Federal Patent Court to review the decision, and a panel presumably consisting of partly the same people would probably affirm the previous decision in the new context. If Apple salvages at least a photo gallery bounce-back claim at the end of those proceedings, it can ask the Mannheim court to resume the utility model infringement action against Samsung. It can also sue Google's Motorola Mobility and others, at the appropriate time, over the utility model, which will be in force until mid-2017.

That said, today's ruling shows that "boy have we patented it" was overly optimistic -- as was Steve Jobs's claim in the same presentation that the iPhone was five years ahead of the competition. As Apple found out, it took Samsung only six months to copy it -- and Samsung didn't even make the first iPhone-clone Android phones.

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Smartphone patent foes, other tech firms jointly urge Europe to prevent rise of abusive litigation

An impressive, diverse coalition of technology companies (even including a couple of major European non-IT companies such as adidas and Deutsche Post DHL) has sent an open letter to European decision-makers expressing concern over two aspects of the latest draft of the rules of procedure for Europe's future Unified Patent Court (UPC) that could create "significant opportunities for abuse" -- not only, but also, by patent assertion entities (PAEs), often referred to as "patent trolls". These two aspects -- bifurcation coupled with easy access to injunctions -- are problematic characteristics of the current patent litigation reality in Germany (which the letter doesn't say, but it's a fact) that could affect the whole of Europe once the UPC begins its work and adjudicates patent infringement lawsuits seeking Europe-wide remedies (which German courts presently cannot do).

The letter to the governments of EU Member States, the European Parliament, the European Commission and the Preparatory Committee of the UPC was first published and reported on by the New York Times and warns that the envisioned framework would give PAEs "substantial bargaining power to force excessive settlements from companies", which "would, in all likelihood, lead to a rise of abusive litigation before the UPC". The letter notes that "PAEs have already begun to set up shop in several European countries, drawn by the potential for siphoning more revenue from European companies".

The tech coalition's letter comes a few days before an October 1 deadline for stakeholder submissions to the Preparatory Committee.

Not only do the signatories collectively represent a huge share of global IT innovation but it's even more remarkable that there is a consensus on these concerns even among companies that typically disagree on patent policy and have litigation pending against each other in the U.S. and Europe. The three most important ongoing smartphone patent disputes are Apple v. Samsung, Microsoft v. (Google's) Motorola, and Apple v. (Google's) Motorola (I'm not counting Oracle v. Google here because it's strictly a copyright case on appeal). Four of the parties to those disputes -- Apple, Google, Microsoft, and Samsung -- are among the signatories. While Apple and Microsoft generally promote strong IP protection except for combating the abuse of standard-essential patents (SEPs), Google and Samsung jointly oppose Apple's pursuit of injunctive relief over non-SEPs in the U.S. but aggressively leverage their SEPs. In the U.S. patent reform debate, Microsoft's focus is on transparency in ownership and the recovery of legal fees, while Google pursues a broader anti-software-patent agenda. But in the context of the UPC's rules of procedure, they all agree and have united to urge Europe to prevent major damage to innovation and the economy at large. They are joined by other tech players like BlackBerry, Bull, Cisco, the European Semiconductor Industry Association (ESIA), HP, Intel, SFIB (a French IT industry association), Yahoo, and major carriers (Deutsche Telekom, Telecom Italia) and -- didn't I just mention the economy at large? -- two companies that are primarily users, not makers, of IT: adidas (which has been sued by numerous patent trolls including Lodsys in the U.S.) and Deutsche Post DHL.

As a Europe-based litigation watcher with a cross-jurisdictional perspective and a former activist in EU patent policy, I totally agree with these companies. Almost five months ago I already highlighted "the risk of Europe becoming the new Eldorado for NPEs/PAEs/trolls" and warned against focusing the whole patent reform debate exclusively on the U.S. while there also what I described as "the European threat". It would be a mistake of enormous proportions to think that patent trolls are and will remain exclusively a U.S. problem. The way litigation in general works in the U.S. (such as the "American Rule" of no recovery of legal fees except under narrow circumstances) creates some opportunities for trolls, but with respect to the two concerns of this coalition of tech companies over the UPC, the German framework -- which, again, would affect the whole of Europe based on the proposed rules of procedure -- has terrible shortcomings in areas in which defendants in U.S. patent cases are actually in better shape. In the U.S., there is a full invalidity defense in all patent infringement proceedings -- not so over here, where bifurcation, a concept I've blogged about and criticized before, typically results in infringement rulings long before adjudication of parallel nullity (invalidation) complaints, creating an opening for the enforcement of improperly-issued patents, potentially for several years (way too long for most defendants to refuse to settle). And those infringement rulings -- which makes bifurcation so bad, but also constitutes a major problem in its own right -- almost always represent injunctions, i.e., sales bans.

Good patent policy has to take into consideration the practical implications for businesses and the tactical situation that defendants face at different junctures. It's not enough to just put procedures in place that theoretically result in a correct result after four or five years (when all appeals have been exhausted) because most lawsuits don't reach that point. It's of the utmost importance to prevent holders of dubious patents from having undue leverage at the stages at which a vast majority of patent infringement cases are settled. Uncertainty is a recipe for undue leverage. Europe's decision-makers have to ensure that there is enough legal certainty along the way that defendants won't be forced to settle on unreasonable terms.

The stakes are high for Europe and for the officials who ultimately have to ratify the UPC's rules of procedure. If they adopt a framework now -- at a point at which far-reaching patent reforms are being debated in the U.S. -- that invites abusive patent litigants (trolls and others) to capitalize on the shortcomings of these rules, they won't be able to say that they didn't know, much less after today's remarkable letter. Frankly, it's not that hard to increase legal certainty in the areas highlighted by this tech industry coalition. If you want to have bifurcation at all, you can at least ensure that stays of infringement cases pending separate invalidation actions are reasonably available -- more widely than in Germany. And for injunctive relief you can also provide the judges of the future UPC with some guidance as to which factors to take into consideration at the remedies stage (it would even be possible to indicate the weight certain factors should have).

I'm going to talk more about the UPC subject in the months ahead. In the final part of this initial reaction to the open letter I just want to show an example of how the combination of bifurcation (with an exceedingly high standard for stays) and automatic access to injunctive relief can hurt consumers. In February 2012 Motorola Mobility (a few months before the closing of its acquisition by Google) won a German injunction against Apple over a push notification patent. It enforced immediately, resulting in Apple's forced deactivation of the feature (for Germany-based users) in late February 2012. That was 19 months ago -- that's a year and half plus one month. And according to Apple's tech support website, the feature is still unavailable, though I expect it to be re-enabled rather shortly since an appeals court, finally, lifted this injunction earlier this month (in order for enforcement to actually end, Apple must firstly post a bond and do some paperwork, which can take a few weeks) because a preliminary ruling by Germany's Federal Patent Court (which will in a few hours hold a hearing on a multi-touch patent Apple enforced against Motorola) indicated that this patent is dead in the water. In the meantime, a UK court had held its key claim invalid for four (!) independent reasons, the Mannheim court that originally granted the injunction had stayed a case in which Microsoft had to defend itself against it, and the appeals court had already stayed the appellate proceedings back in April, also over doubts concerning the validity of the patent. The appellate hearing took place almost six months ago, and the court made clear that it has serious doubts about whether this patent should ever have been granted -- but as of the time of publishing this post, German Apple users are still deprived of this feature. Why? Because the German approach is that a patent right is vitiated pretty much entirely if its owner can't enforce an injunction (in other words, there's an underlying assumption of irreparable harm to the patentee), while premature enforcement of an improperly-granted injunction can always be addressed in a subsequent lawsuit over enforcement damages (so there's an underlying assumption that monetary compensation is almost always adequate to make the victims of illegitimate enforcement whole) -- but it would be much better policy to consider sales bans to cause irreparable harm in many cases and then to weigh such harm against other considerations.

I have harshly criticized Google for its trollish enforcement of Motorola's push notification patent. This undermines Google's credibility in the U.S. patent reform debate where it (directly and through lobbying fronts) uses "trolls" as a pretext for its push for a general weakening of IP enforcement while its own behavior shows that operating companies can behave trollishly as well. But I applaud Google for promoting in the EU context a reasonable balance. The fact that it urges policy makers here to prevent all patent holders, including Google itself, from doing in the future on a Europe-wide basis what Google has been doing recently in Germany is really positive and enhances the credibility of this tech coalition.

Now it's up to policy-makers to heed these concerns and act accordingly.

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Motions for judgment on the pleadings denied in Microsoft-Google FRAND breach case

On September 4, a federal jury rendered a verdict on the claim of a breach of the duty of good faith and fair dealing in the Microsoft v. Motorola FRAND contract case in the Western District of Washington, finding Google's Motorola to have reneged on its FRAND pledge and awarding Microsoft $14.5 million in damages. After the verdict Motorola said it was looking forward to an appeal, but in order to bring an appeal, it needs a final ruling, and at the current pace I guess the court will issue one well before the end of the year.

After the pleadings to the jury, both parties brought motions for judgment as a matter of law (JMOL). Either party claimed that the evidence supported a finding only in its favor, making a jury verdict unnecessary and asking the court for a directed verdict. As the jury found for Microsoft anyway, Judge Robart saw no more basis for Microsoft's motion and asked Microsoft whether it would withdraw its motion. Microsoft agreed with the judge in principle but didn't believe that a withdrawal was the appropriate procedural path. In the event of a withdrawal, Motorola could have claimed later (on appeal) that Microsoft had waived certain arguments or that it used surprise tactics by raising them on appeal. Microsoft explained that if the appeals court agreed with it that the case could have been decided in its favor even without asking a jury, then this would render irrelevant any claim by Motorola that it was prejudiced by the court's jury instructions, so it wanted to preserve its record with respect to its JMOL theories. But recognizing that it wouldn't make a difference for the purposes of the trial court if its motion was granted, it suggested that the court could deny its JMOL motion as moot. And that's what happened.

Motorola brought even two JMOL motions during the trial: one after Microsoft rested its case-in-chief and one after it rested its defensive case. These motions had largely identical content. I'm sure that Motorola never seriously expected those motions to be granted. It brought them to preserve the record.

Yesterday Judge Robart entered an order denying those motions for JMOL (this post continues below the document):

13-09-24 Order Denying Motorola's Motions for Judgment on the Pleadings by Florian Mueller

In his order, Judge Robart noted that Motorola presented certain theories and arguments that the court had previously rejected. Just like Motorola's motions were a déjà-vu experience, so are various passages of the order that refer to earlier rulings. The "new" parts basically came down to Motorola saying that Microsoft had not presented sufficient evidence based on which a reasonable jury could find a breach and award damages based on Microsoft's claims. Judge Robart obviously disagrees. The question here is whether the facts when seen in light of the non-moving party (Microsoft) allow a reasonable jury to reach a conclusion in Microsoft's favor. And there was enough evidence to support the jury's findings.

The Motorola motions denied today were filed under Rule 50(a). We may still see one or two post-trial motions. Under Rule 50(b), Motorola could ask the court to overrule the jury, but it's hard to see how such a motion could raise any new issue beyond the Rule 50(a) motions with respect to liability. Also, a Rule 59 motion for a new trial could still be brought. Needless to say it wouldn't go anywhere due to the facts of this case.

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ITC urges dismissal of Microsoft lawsuit, proposes own enforcement proceeding against Motorola

There's a new development in the dispute between Microsoft and certain governmental entities relating to the (non-)enforcement of an ITC import ban against Google subsidiary Motorola Mobility's Android-based devices over a meeting scheduler feature. The United States International Trade Commission (USITC, or just ITC), which issued the relevant exclusion order in May 2012, says that Microsoft's lawsuit in the United States District Court for the District of Columbia against the Department of Homeland Security and other entities and certain officials should be dismissed without prejudice (which would enable Microsoft to refile it) in favor of the U.S. trade agency's proposed alternative, an ITC enforcement proceeding in which the substantive issues (such as whether certain Android apps do or do not fall within the scope of the ITC's exclusion order) should be resolved.

This is all about procedures -- and those procedures have important business implications. No one would doubt the ITC's ability to build an evidentiary record, hold an evidentiary hearing and issue an enforcement ruling on a matter like this. But this can easily take a year or more. That's why, considering the fast pace at which the wireless devices market moves, businesses like Microsoft obviously seek to avoid such delay where it doesn't appear necessary.

The way I read Microsoft's complaint and subsequent filings in this case, the company was perfectly aware from the outset that the legal standard for winning this case -- and especially a preliminary injunction -- against governmental agencies is high. the standard is "arbitrary and capricious". Without taking a firm position on this particular case (I don't have all of the relevant information), I do want to point out one problem that the ITC cannot solve and another type of issue that prevailing patent holders should not have to put before the ITC:

• Accountability is key. In a case in which a governmental agency steps over the line in extreme ways that give an advantage to one party and disadvantage another one, there must be a way to have a court of law -- and not just another governmental agency, even if it has some limited quasi-judicial authority -- look at this and tell the government to comply.

  Some Washington lobbyists misunderstood my blog post on the original complaint. It was a nonjudgmental report for the most part. I did, however, find some allegations in Microsoft's complaint that I found at least disconcerting because it appeared (and still appears) to me that Customs and Border Protection, which is merely tasked with enforcement of exclusion orders, engaged in some backroom dealmaking with Google that went too far for my taste. Let's look at it this way: if a court sends someone to jail without parole, the detention officers shouldn't negotiate a probation deal with him. Their task is to enforce, not to issue or modify rulings. Admittedly, detention is a much simpler issue than the question of whether products infringe patents. Still, enforcement must be limited to enforcement.

• There are undoubtedly many cases in which the enforcement of an exclusion order raises valid questions that only the ITC itself is equipped to resolve. But where there aren't any valid questions left and the "arbitrary and capricious" standard is accordingly met, there must be a shortcut for a prevailing patentee. The "arbitrary and capricious" standard provides only a narrow corridor: the vast majority of enforcement issues must go back to the ITC, but there must also be room for extreme cases in which -- because the ruling is clear -- the enforcers are found to have failed to do their job and are told to do it. That's what this dispute will help clarify, no matter the outcome.

Technically, the ITC's motion is a motion for leave to submit an amicus curiae brief. No party objects to the ITC's participation, so let's assume that the brief, which the Commission attached to its motion, will soon be deemed submitted. The brief supports the Government's motion to dismiss Microsoft's lawsuit, but it does not take a position on the merits (and not even on whether the United States District Court for the District of Columbia has subject matter jurisdiction over this case): it merely argues that the ITC has primary jurisdiction over this question, and that the issue should be resolved in an ITC enforcement proceeding. The ITC proposes a dismissal without prejudice, which would enable Microsoft to still pursue its claims later, if necessary. For the reasons I explained above, the ITC's proposal comes with a justice-delayed-is-justice-denied problem for Microsoft, and an ITC enforcement proceeding is not a substitute for a court review of certain governmental agencies' actions.

I did not previously report on the Government's motion to dismiss but always intended to mention it in my next post (i.e., this post) on this case. The reason I didn't do a separate post on that motion is that Google, which is intervening in this case, previously (last month) brought a motion to dismiss, and the Government's motion was pretty consistent with Google's. I have uploaded the Government's motion to Scribd, and here's the ITC's amicus brief (as part of a motion for leave):

13-09-23 Motion by USITC to Submit Amicus Brief to DC District Court by Florian Mueller

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Nokia wins preliminary ITC ruling against HTC's Android devices over two hardware patents

Administrative Law Judge (ALJ) Thomas Pender of the United States International Trade Commission (USITC, or just ITC) has issued a preliminary ruling on Nokia's May 2012 complaint against Taiwan's HTC. A short summary of the ruling has just been published on the U.S. trade agency's website; a redacted version of the full ruling will become available in a few weeks. Nokia is clearly on the winning track and now fairly likely (though today's initial determination is subject to a Commission review, which is scheduled to take four months) to win a U.S. import ban against HTC's Android-based devices over two of the three patents-in-suit:

• U.S. Patent No. 6,393,260 on a "method for attenuating spurious signals and receiver"

• U.S. Patent No. 7,415,247 on a "method and arrangement for transmitting and receiving RF signals through various radio interfaces of communication systems"

These are wireless patents but they aren't standard-essential.

A third patent, which covers tethering and is considerably older than the other two patents-in-suit, was not found infringed (nor was it deemed to be practiced by Nokia's domestic industry products).

Throughout the course of the investigation Nokia had dropped several other patents, which complainants in ITC investigations are simply expected to do in order to enable the agency to stay on schedule.

Both parties can now petition the Commission, the six-member decision-making body at the top of the ITC, for a review of findings adverse to their interests. Nokia can try to prevail on a third patent while HTC will presumably challenge Judge Pender's findings with respect to the two patents he found infringed.

Nokia is presently making significant headway with its enforcement of non-standard-essential patents against HTC (HTC does already have a license to Nokia's SEPs, but not to any of its non-SEPs). On Wednesday HTC appeared to be on the losing track in a German lawsuit brought by Nokia over a USB configuration patent, in which the Munich I Regional Court plans to hand down a decision on November 8, 2013. On Friday, the Mannheim Regional Court cleared Nokia of infringement of a video codec patent asserted by HTC subsidiary S3 Graphics. A few hours later, Judge Pender at the ITC denied a stalling motion HTC had brought in the wake of the announcement of the Microsoft-Nokia deal. Now Nokia also has the upper hand in this crucial ITC proceeding. And it won a German injunction over a power-saving patent in March -- but HTC, which is extremely good at defending against patent infringement claims, succeeded in fending off various German Nokia lawsuits or at least getting them stayed.

On a worldwide basis (U.S., UK, Germany and Italy), Nokia has asserted approximately 50 different patents against HTC. Today's ruling relates to Nokia's first ITC complaint against HTC. It was recently allowed to add a patent originally asserted in the first one to the investigation of its second (spring 2013) complaint.

The dispute may soon reach a tipping point, or may already have reached one depending on HTC's assessment of the situation, and it won't take too long before HTC will opt to take a royalty-bearing non-SEP license from Nokia. Another target of Nokia's non-SEP enforcement, BlackBerry (then named Research In Motion) already recognized the strength of Nokia's portfolio and started to paid up last year.

A very meaningful validation of Nokia's patent portfolio was the recent 1.65 billion euro license deal the Finnish company signed with Microsoft. Licensing and litigation are the two areas in which a patent portfolio can prove its worth.

[Update] Nokia has issued a first statement: "Nokia is pleased that the initial determination of the ITC confirmed that HTC has infringed two of our patents. Local counterparts of one of these are also already in litigation against HTC in London, UK; Dusseldorf, Germany and Rome, Italy. We will reserve further comment until we have had the chance to study the judgment in detail." [/Update]

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More than 100 innovators oppose expansion of Covered Business Method Patents program

I have disagreed with the Innovation Alliance on FRAND issues, but today it issued a press release relating to U.S. patent reform that I believe raises some legitimate concern over one particular aspects of the current patent policy debate. There are certain legislative proposals that would greatly expand the scope (to all IT patents) and the term (which was originally meant to be limited) of the "Covered Business Method (CBM) Patents" program under the America Invents Act. As a result, pretty much every IT-related patent could be subjected to a post-grant review (PGR) even after the nine-month window for a PGR -- and companies would, as the experience with the CBM program shows, routinely request and frequently obtain stays of infringement lawsuits pending a PGR proceeding.

Defendants against U.S. patent infringement lawsuits have a full invalidity defense in an infringement proceeding (unlike in Germany). They can also request reexamination and move for stays based on interim reexamination decisions (though first Office actions and even so-called "final" Office actions don't necessarily impress a court). And I believe the preponderance standard would be the more appropriate one for invalidity rulings than the standard of clear and convincing evidence. But there comes a point where there are so many obstacles to enforcement that innovators are concerned.

The Innovation Alliance is one of more than 100 signatories to a letter that is addressed to the chairmen and ranking members of the Senate and House Judicairy Commitees and raises two primary concerns: it considers the expanded CBM proposals to result in "discriminati[on] against an entire class of technology innovation", which would run counter to U.S. efforts to convince other countries of the benefits of IP protection and to ensure worldwide compliance with the TRIPS Agreement; and it's worried that "infringers would be able to delay legitimate lawsuits they face indistrict court by initiating CBM proceedings at the [patent office]", allowing them to "buy time to gain market share on innovative, patent-holding competitors".

The Innovation Alliance's press release highlights the following ones of the more than 100 signatories: 3M, Adobe Systems, Boston Scientific, BSA – The Software Alliance, Caterpillar Inc., Cleveland Medical Devices Inc., Dolby Laboratories, The Dow Chemical Company, DuPont, Eli Lilly & Company, General Electric, IBM, Innovation Alliance, Inventors Network of the Capital Area, Johnson & Johnson, Microsoft, National Association of Manufacturers (NAM), Procter & Gamble, Qualcomm, Tessera, U.S. Business and Industry Council, and Xerox Corporation, among others.

The collective innovative capacity of those signatories is going to bear substantial weight with U.S. lawmakers, and most importantly, the letter raises serious issues that must be considered.

There's an additional point I'd like to make about those "expanded CBM" proposals. Certain initiatives (such as these) are not limited in their potential impact to so-called "patent trolls". The most vocal critics of "patent trolls" have a far broader agenda. They seek to weaken not only illegitimate IP enforcement but all IP enforcement, at least in the IT sector. The fact that proposals discriminating against a particular (and very large) category of patents would undermine U.S. trade policy in connection with intellectual property is presumably anything but an unintended consequence.

Here's the letter:

Letter: 100+ Innovative Businesses and Organizations Send Letter to Congress Objecting to "Covered Business... by innovationalliance

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Samsung seeks supra-FRAND royalty from Apple in Germany but backtracks on disgorgement

Yesterday I attended a Samsung v. Apple (re-)trial in Mannheim further to a March 8, 2013 decision to reopen proceedings because Judge Voss' ("Voß" in German) court felt at the time that Apple had not yet met its burden of proof as a defendant. The patent-in-suit is a 3G standard-essential patent(SEP), EP1679803 on a "method for configuring gain factors for uplink service in radio telecommunication system".

While I didn't immerse into all of the technical detail relevant to the infringement and validity analysis, the retrial was exceptionally interesting from a FRAND and standard-setting point of view -- transcending the Apple-Samsung dispute -- in two ways:

• The remedies discussion showed that Samsung has become, once again, more defensive in the FRAND context, and I attribute this to a combination of antitrust pressure and litigation tactics. In December 2012 Samsung unilaterally withdrew, in anticipation of a Statement of Objections (SO, preliminary antitrust ruling) by the European Commission, all of its European SEP-based injunction request, but continued to seek monetary relief. Meanwhile it has also become less aggressive with respect to monetary relief. At yesterday's trial counsel for Samsung handed the court (and Apple) a document clarifying its modified prayers for relief, which explicitly limit the accounting requested from Apple (in Germany, only a prevailing patentee is entitled to such an accounting) to damages theories other than the pursuit of a disgorgement of infringer's profits. Disgorgement is usually a popular remedy in German patent infringement cases. By asking for financial data relevant to the computation of other damages but not related to profits per se, Samsung shows that for the time being it's not preparing a disgorgement claim -- but it doesn't appear to have dropped its damages claim yet. And Samsung declined to stipulate to Apple's proposal that it limit its requested compensation to a FRAND royalty.

  Samsung's tactical choices in the FRAND context increasingly complicate Google's efforts to extract more than a FRAND royalty for Motorola Mobility's SEPs by isolating the company that supplies the software powering most Samsung smartphones and tablets.

• The assessment of the chances of success of Apple's nullity (invalidation) complaint against the patent-in-suit (with a view to a reasonably likely stay of this case) centered around an issue that affects standard-setting and calls into question not only the validity of many SEPs but also their actual contribution to innovation: companies take out patents on (at worst) what they hear at the standard-setting table or (almost as bad) on predictions of where a standardization effort is headed. Two researchers, Byeongwoo Kang and Rudi Bekkers, authored a paper on this subject on behalf of the Eindhoven Centre for Innovation Studies (ECIS), entitled "Just-in-time inventions and the development of standards: How firms use opportunistic strategies to obtain standard-essential patents (SEPs)". They examined the patenting behavior of participants in standard-setting and identified unusual filing activity around key standard-setting meetings:

  "Our data reveals a strong relationship between patent timing and the occurrence of meetings. We observed a remarkable phenomenon that we call 'just-in-time-inventions': the patent intensity of about-to-become claimed essential patents is much higher during or just before these meetings than in other periods. At the same time, they are of considerably lower technical value ('merit'). This suggests that the just-in- time inventions are only beneficial to their owners, whereas for the public they merely invoke unnecessary costs. Finally, we observed that the phenomenon of just-in-time inventions is highly concentrated among specific types of firms, above all vertically integrated ones, and the incumbent champions of the previous technology standard."

So the two highlights of yesterday's retrial relate to the Alpha and the Omega of SEPs: the time when they are filed and the inventions are adopted (which is pretty much the same in many cases) and the time when remedies for past "infringement" by implementers of the standard are determined.

I'm now going to elaborate on both topics in separate sections. As for the technical aspects of this patent, I made some effort to follow the discussion but by far not enough to fully understand the technology at issue. Based on the court's case management decisions and questions/reactions, it appeared to me that Judge Voss and his panel were leaning Samsung's way on infringement (simply put, while Apple argues that 3G networks don't transfer a particular number and stressed that a power ratio is a different thing than an amplitude ratio, the court already appeared at the first trial to be inclined to find an infringement if some different information with a deterministic relationship to the value described in the claim is transferred), but at the same time appeared to lean Apple's way on the question of whether to stay the case until the Federal Patent Court rules on the validity of the patent-in-suit. A decision (which may or may not be a final ruling) has been scheduled for November 22, 2013.

Samsung once again modified its prayers for relief -- now with respect to damages accounting

Samsung's counsel told the court that the purpose of the latest modification of the prayers for relief is to avoid a stay of the Mannheim proceedings pending resolution of the European Commission's ongoing antitrust investigation of Samsung's SEP assertions against Apple. Such a stay would happen if the court concluded that there is a risk of an inconsistency between an actual or upcoming European Commission decision and its own position on an outcome-determinative legal issue. Apple still argued that the case should be stayed not only pending the nullity proceedings at the Federal Patent Court but also the EU antitrust investigation. According to Freshfields Bruckhaus Deringer's Wolrad Prinz zu Waldeck und Pyrmont, who presented Apple's FRAND/antitrust arguments, Apple's antitrust-based affirmative defense, the merits which he says have been "factually determined by the European Commission", relates not only to injunctive but also monetary relief under German law. In this context, monetary relief includes an entitlement to an accounting that enables a prevailing plaintiff to bring a quantified damages claim. Unlike in the United States, where damages-related discovery typically takes place during the infringement proceedings (though a bifurcated approach of determining liability first would also be possible in the U.S. and was, in fact, proposed by Apple in a Florida litigation with Google's Motorola), a patent holder needs to prevail on liability in order to be entitled to such an accounting.

Hengeler Mueller's Dr. Wolfgang Kellenter argued the FRAND part for Samsung and said that Samsung's amended, narrowed prayers for relief -- no longer seeking the kind of accounting need for a disgorgement of infringer's profits -- eliminated the potential for conflicting rulings. But Prinz zu Waldeck said that the antitrust issue would only be mooted if Samsung agreed to seek nothing more than a FRAND royalty.

Theoretically, Samsung could still pursue a disgorgement, but in that case it would need to bring a new complaint in order to obtain some of the financial data relevant to a computation of profits, or it would have to base a damages claim including disgorgement on a combination of hard numbers (sales figures etc.) and speculation (profits). The latter scenario would be grossly inconsistent: ruling out a damages theory (disgorgement) at the accounting stage but going for it nevertheless when bringing the actual claim wouldn't make sense.

Judge Voss asked Apple how Samsung would ever receive a FRAND royalty for its SEPs if Apple argues that it's precluded from seeking injunctive as well as non-injunctive remedies (damages). Prinz zu Waldeck mentioned that, for an example, Samsung could bring claims in Germany under the theory of unjustified enrichment. In any event, the full gamut of remedies may be available in cases in which there is no willingness to take a license, but in this case, the European Commission has stated its assessment that Apple is a willing licensee. Dr. Kellenter disputed that Apple is a willing licensee. He said that Apple still had not made a binding offer to take a license in accordance with the German Orange-Book-Standard approach, but that one is, as Prinz zu Waldeck explained, at issue in a case referred to the Court of Justice of the EU. Samsung disputes that the referral has a bearing on non-monetary remedies, but the fifth question the Düsseldorf Regional Court asked the CJEU clearly refers to those.

I don't think Samsung's narrowing of its prayers for relief was made only in an effort to avoid a delayed resolution of the Mannheim case, but litigation tactics presumably did play a role. Samsung's problem in Germany is that it has not yet won a SEP case against Apple, and to the extent that it has appealed any decisions, no ruling favorable to Samsung is likely to come down anytime soon. An infringement finding was made in a different case earlier this year, but that one was stayed pending the parallel nullity proceeding, which few patents in this industry survive. So Samsung needs to obtain at least one finding of liability in Germany in order to have a basis for demanding any money from Apple. And that's the way it should be. No one vetted Samsung's own declarations of standard-essentiality. If companies could turn invalid and/or non-infringed patents into a gold mine by participating in standardization, declaring them essential and later demanding that someone like Apple take a worldwide portfolio (!) license, the result would be disastrous for competition and innovation. There's absolutely no factual basis for a presumption (let alone a strong or even insurmountable presumption) that a declared-essential patent portfolio is valid and indeed infringed.

Dr. Kellenter described Samsung's current prayers for relief as a request for a merely "declaratory" judgment: a declaration that Apple owes Samsung damages. While the most aggressive damages theory under German law (disgorgement of profits, available here with respect to all patents and not only design patents like in the U.S.) is no longer at issue, Samsung is unwilling to declare now that it's going to seek only a FRAND royalty with respect to past use.

I attribute Samsung's backtracking on disgorgement in no small part (in addition to litigation tactics) to its efforts to settle the European Commission antitrust investigation. The effect of antitrust pressure was even clearer in December when Samsung abandoned its push for sales bans, but it's very likely to play a role now, too. In my opinion, the European Commission should be encouraged by the fact that Samsung backs down step by step, but shouldn't settle as long as the result still leaves an opening for supra-FRAND claims. Also, as the Commission noted in December, Samsung's conduct caused harm before it was discontinued.

Last month I noted a certain evolution of Samsung's stance on FRAND based on that and how it argued against the availability of ITC import bans over SEPs in its defense against Ericsson. Samsung is still trying to play some games with SEPs. But at this point Google's Motorola Mobility is the only major company in this field (apart from Qualcomm and NPEs like InterDigital) left to take absolutely extreme positions on SEP-related remedies. Samsung's more and more defensive (though still far from perfect) behavior isolates Google in the industry and in the eyes of courts and regulators.

Opportunistic patenting by participants in standard-setting

I discussed the issue of opportunistic patenting activities by participants in standardization further above, and the best resource on this broader issue is the research paper I linked to. I'd just like to add some information that makes this case here a pretty good example of what those researchers found out.

Samsung's patent-in-suit in the German case, which was granted by the European Patent Office, claims priority based on two Korean patent applications. The priority date of one of them is January 6, 2005, while the other one has a priority date of February 4, 2005 -- that's a difference of only 29 days. The Mannheim court's assessment of likely invalidity now hinges on whether a standard-setting document that was published between those dates is eligible as prior art with respect to a particular claim limitation. This depends on whether the first priority date or only the second one applies as far as that claim limitation is concerned.

Apple argues that the limitation was not there originally and added only after the publication of the prior art document. If Apple's allegation is true, then Samsung made the first filing just weeks (or days) before a certain standardization document (presumably authored right after a standard-setting meeting) was published, and the second one shortly thereafter. This can hardly be a coincidence.

There are organizations and people who complain all the time about a trend toward "devaluation" of SEPs. They obviously dislike Judge Robart's rate-setting opinion; they also disagree with Judge Posner's dismissal of Motorola's out-of-this-world royalty demands. But the value of a patent should be the value of what the inventor contributed to innovation, and it's not really innovation if technical concepts are patented based on what is discussed or predicted to be discussed at a standard-setting meeting. It's more like the SEP-related equivalent of cybersquatting (domain squatting).

Even if this patent here is ultimately found valid, and even if implementers of the 3G standard must actually use the claimed invention, I don't see much value in it in terms of a contribution to innovation. This patent is actually very narrow. If not prescribed by a standard, it's highly unlikely that a device maker like Apple would actually implement it. If Apple needs to license this patent at all, the royalty rate should be very low.

The Federal Patent Court has not yet scheduled its nullity hearing on this patent. Apple believes it will take place in the first half of next year, but that's not certain. If the Federal Patent Court rules on this before Apple and Samsung settle, and if there's a finding that Samsung filed a patent on something right after it appeared in a standardization document, it won't enhance Samsung's reputation and will make Apple a poster child of a certain, rampant form of abuse of the standard-setting process.

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ITC judge set to rule on Nokia complaint on Monday, gives HTC stalling motion short shrift

The stalling artists at HTC have gone too far by asking the United States International Trade Commission (USITC, or just ITC) to stay its investigation of Nokia's first complaint against its Taiwanese rival pending consummation of the Microsoft-Nokia transaction. On Friday, Administrative Law Judge (ALJ) Thomas Pender denied HTC's motion before Nokia had even replied (or at least before any Nokia opposition showed up on the U.S. trade agency's electronic document system). This was the second blow to HTC in the dispute with Nokia on the same day. Earlier in the day, Judge Andreas Voss ("Voß" in German) of the Mannheim Regional Court had tossed a complaint by HTC subsidiary S3 Graphics against Nokia.

In the Friday order, Judge Pender confirms again that his initial determination (preliminary ruling, subject to Commission review) will issue on schedule, i.e., this Monday (September 23, 2013).

HTC's motion is still sealed, but Judge Pender's order is not, shedding some more light on the motion. HTC requested Judge Pender to stay "this Investigation until shortly after the sale of Nokia's D&S business is expected to be finalized, i.e., April 1, 2014, a limited reopening thereafter of the record on domestic industry, and a corresponding eight-month, one-week extension of the procedural schedule and the target date for this Investigation". Judge Pender's order sums up HTC's additional requests as motions to preclude Nokia from relying "(1) on activities associated with Microsoft to establish the existence of domestic industry for any purpose at any stage of this Investigation, or to support a domestic industry during the term of any exclusion order issued by the Commission in this Investigation; and (2) upon any licensing activities to support a domestic industry going forward". All of this information is consistent with what I inferred from the headline of the motion (the only part of the motion that was made public before the order).

Judge Pender found it "impossible to discern any reason to grant HTC's motion" when considering (the following bullet points are, besides the commentary in brackets, a verbatim quote from the order, but reformatted)

1. the speculative nature of the motion [elsewhere, the order says that generally "HTC basees its allegations on what might occur and then argues from that to what might occur"];

2. the timing of the motion [too early with respect to the closing of the Microsoft deal, which a footnote of the order mentions could still change between now and closing in order "to obviate HTC's arguments" if necessary at all, and almost on the eve of the initial determination];

3. the lack of relevancy of licensing to this investigation [elsewhere, the order notes that HTC "stipulated to facts sufficient to establish Domestic Industry", which facts contain no mention of licensing, nor did Nokia present any argument concerning licensing -- consequently, the initial determination on Monday won't address licensing either];

4. the extraordinary reach and scope [eight months of delay] of the relief requested (and thus its potential prejudice to Nokia); and

5. the lack of any regulatory or other relevant legal support for HTC's motion.

Judge Pender's reference to a stipulation to facts relevant to the domestic industry analysis will hopefully not discourage other parties from entering into such stipulations. And I don't think there will be fewer stipulations, but presumably all future parties to ITC investigations will, provided that their counsel is aware of what happened in this Nokia-HTC case, ensure that if they stipulate to facts warranting a finding of domestic industry they will not be limited in their ability to raise or re-raise any domestic industry arguments if any underlying facts change or are about to change. While I agree with Judge Pender's prompt denial of this motion, I think he could have been clearer as to the role HTC's stipulation to facts played in this. I understand the order as saying in this regard that neither Nokia nor HTC made licensing an issue in this investigation, so there's no reason he should grant a licensing-related motion. But what he wrote could also be understood as saying that HTC, through the stipulation, somehow waived arguments.

There's no indication that HTC suggested licensing was part of Nokia's argument at this stage, so I don't think it had to be reminded of a stipulation to different facts. This was a motion to preclude, not a motion to strike or exclude. The fact that a claim or argument hasn't been made yet is not, in and of itself, a sufficient reason to deny a motion to preclude, and that's not what Judge Pender meant if I understand him correctly. I believe he meant to say that HTC can't just shoot down pre-emptively all sorts of arguments Nokia might make one day in what could be a future scenario because otherwise there would be too many motions of this kind. And HTC's motion to preclude was exceedingly broad and vague (it was an "any", "any", "any" scope), which I believe would have been an even stronger reason to deny it than a stipulation to different facts.

The order does not state explicitly whether Nokia could, after the closing of the Microsoft deal, keep an import ban (assuming that it wins won in the meantime) in effect by arguing that there still is a domestic industry relating to the relevant patents, possibly also raising a licensing-based argument. I don't even know if there is any precedent at the ITC for an import ban that was granted because the domestic industry requirement was satisfied by one set of facts only to be lifted later because those facts changed after a transaction or upheld after such a change because a modified set of facts, following a transaction, still enabled the complainant to satisfy the requirement. The question may never have been addressed, and probably won't have to be addressed here.

It's unlikely that HTC wouldn't settle with Nokia if an import ban was ordered, only because it hopes that the import ban would go away shortly thereafter due to the closing of the Microsoft deal. The target date for the final ruling here is in four months; import bans take effect after the 60-day Presidential review period, which would be late March, and the Microsoft-Nokia deal is expected to close in early 2014, which could be during the Commission review of the initial determination, during the Presidential review, or shortly after the ban takes effect. Should HTC elect to engage in such a gamble, then we'll get some clarification. What I can't imagine is that a whole new ITC investigation or a lengthy, full-blown enforcement proceeding would have to be conducted to revisit the domestic industry question. But I wouldn't be surprised to see some limited reopening of the record on domestic industry at that stage. Also, considering how U.S. Customs & Border Protection apparently acted in its (non-)enforcement of Microsoft's import ban against Motorola, HTC might be able to persuade customs officers to withhold enforcement pending another clarification of the domestic industry question...

HTC's motion was the first but may not be the last attempt by someone to leverage the Microsoft deal, under which no utility (i.e., technical invention) patents are even transferred, to impair Nokia's IP monetization efforts. But if any other attempts are made, they will suffer a similar fate, and probably similarly quickly, as HTC's motion. In this regard it's important to bear in mind that Microsoft has nothing to do with Nokia's obligations vis-à-vis its shareholders. If a company owns intellectual property, it must put it to good use. It's always been like that, at Nokia and elsewhere, and always will be. HTC will need a license from Nokia covering some of its non-standard-essential patents (it already has a SEP license), and it would have needed one anyway, as do others in the industry. Nokia will always be able to satisfy the ITC's domestic industry requirement for at least as long as someone like InterDigital is able to. (By the way, unlike InterDigital, Nokia is still going to own some very significant operating businesses -- the Here maps and the NSN infrastructure business).

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