In the ongoing Apple v. Samsung II trial in the Northern District of California, Apple's lawyers try hard to downplay Google's role, though it's blindingly obvious that Google is the true target of Apple's second California lawsuit against Samsung. Usually a twelve-mile drive (from Cupertino to Mountain View) is more convenient than a twelve-hour flight (from San Francisco to Seoul), but in this case, Apple seeks to benefit from the statistically-established bias of U.S. jurors against foreign companies. Also, the fact that Samsung sells actual devices is an opportunity for Apple to disingenuously make damages claims that run counter to its own, repeatedly-stated position on the proper royalty base for patent licenses and damages. The proper royalty base for Apple's asserted patents in the ongoing trial is Google's Android.
Maybe Apple's counsel can fool a jury, but Apple for sure can't fool Judge Koh's boss ("boss" in a nominal more so than managerial sense). The Chief District Judge of the Northern District of California, Claudia Wilken, wrote in an order (handed down yesterday) that the Rockstar Consortium's "'scare the customer and run' tactic advances Apple's interest in interfering with Google's Android business" and made various other findings relating to Apple's anti-Google/anti-Android agenda.
Before I quote the entire Apple-related passage from Chief District Judge Wilken's order denying a Rockstar motion to dismiss or move out of California a declaratory judgment action brought by Google to protect Android and the Android OEMs Rockstar sued on Halloween 2013, I'd like to defend Apple to some extent here, or to at least give it the benefit of the doubt. I agree with Judge Wilken's conclusion that Apple, since it contributed 58% of Rockstar's funding and has strategic interests relating to Android, has created a situation in which Rockstar has continuing obligations to Apple -- obligations to monetize those patents. However, the fact that Apple is (likely) a majority shareholder does not necessarily mean that Apple has a majority of the voting rights. It's actually unlikely that Apple holds a majority of the votes: its partners are large players like Microsoft and Ericsson, who would hardly have accepted to be (collectively!) Apple's junior partner in terms of control. And if my assumption is right and Apple does not have a majority, then it is possible that Apple participated in the Nortel patent-buying effort only to clear the market of those patents (so as to avoid that Google would use them against it) but perhaps never wanted Rockstar to go out and sue the world including non-smartphone companies like cable operators using Cisco equipment. Maybe Apple even voted consistently against litigation, but wasn't able to singlehandedly prevent it from happening.
Further discovery in the now-continuing California declaratory judgment action could shed some light on Apple's role. Until there is more evidence of Apple being the driving force, I will give it the benefit of the doubt, though Chief District Judge Wilken obviously had to make a decision based on the facts in the record and Apple's majority contribution to Rockstar's funding is indeed a good reason to find that there are continuing obligations that Rockstar has vis-à-vis Apple. The existence of continuing obligations with a company domiciled in the Northern District of California is separate from the question of whether Rockstar is an Apple front to sue Google and its Android partners. Apple tops the list of answers to the "cui bono?" question -- but again, there's a need for more transparency about the decision-making process at Rockstar. It would be utterly unjust if Apple was perceived as the primary culprit if it just got outvoted when trying to prevent this mess (and maybe couldn't sell its shares in this company without its partners' approval), so there's a need for more clarity on Apple's influence and the positions it took whenever the shareholder voted on litigation-related issues.
Here's the full text of the Apple-related passage of the order:
"Google contends that Defendants have accepted substantial obligations to Apple, a forum resident, which require Defendants 'to defend and pursue any infringement against' their patents. [...] Google alleges that Apple is a majority shareholder of Defendants and exerts substantial control over them, and as a result Defendants are obliged to act on Apple's behalf in a campaign to attack Google’s Android platform.
In support of this allegation, Google submits strong evidence that Apple is indeed the majority shareholder of Defendants based on Apple’s majority investment in Rockstar’s predecessor entity, Rockstar Bidco.7 Currently, Rockstar is a Delaware limited partnership which lists'“Rockstar Consortium LLC' located in New York as general partner. [...] But Apple contributed $2.6 billion, or fifty-eight percent of the $4.5 billion total investment in Rockstar Bidco. [...] Although Rockstar Bidco reorganized itself to become Rockstar, it does not appear that any ownership interests changed, nor do Defendants assert otherwise.
Even if Apple is a majority shareholder of Rockstar, if Defendants were able to demonstrate that Apple is a mere passive shareholder and takes no part in patent assertion strategy, then the relationship between Apple and Defendants might not be sufficient to uphold specific jurisdiction. [...] Google alleges that Apple's role extends beyond the mere receipt of profits. Rockstar’s CEO Veschi stated that he does not talk to its shareholders about potential licensing partners or infringement suits, but admitted that he has to show them 'progress and that real work is being done.' [...] Veschi holds periodic calls and meetings with the owners, primarily with their intellectual property departments, and Veschi acknowledges that they 'work well together.' [...] Although Veschi states they avoid talking about details, it does appear at least telling that Veschi speaks directly and periodically with the owners' intellectual property departments to demonstrate that 'work is being done.' [...]
Google demonstrates a direct link between Apple's unique business interests, separate and apart from mere profitmaking, and Defendants' actions against Google and its customers. Google and Apple's rivalry in the smartphone industry is well-documented. Apple's founder stated that he viewed Android as a 'rip off' of iPhone features and intended to 'destroy' Android by launching a 'thermonuclear war.' [...] Defendants' litigation strategy of suing Google's customers in the Halloween actions is consistent with Apple’s particular business interests. In suing the Halloween action defendants, Defendants here limited their infringement claims to Android-operating devices only, even where they asserted a hardware-based patent. [...] This 'scare the customer and run' tactic advances Apple's interest in interfering with Google's Android business. [...]"
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