More than 4½ years after Microsoft sued Motorola for not renewing a license agreement (a renewal that would likely have been costly after Motorola stopped making Windows devices), Motorola still hasn't paid Microsoft a dime in patent royalties on its Android devices, and for now there's no reason to assume that Motorola will come under serious legal pressure in the near term to do so. What Microsoft may, however, receive before or around the 5th anniversary of the dispute is a check over $14.5 million--not in Android patent license fees, but in damages for Motorola's abuse of its (own) standard-essential patents. This would effectively increase Google's cost of acquiring Motorola by slightly more than 0.1%. This amount is certainly much less than whatever Google spent on legal fees related to Motorola's spats with Apple (where a ceasefire was agreed upon almost a year ago, with the exception of Google's continuing fight against the European rubberbanding patent) and Microsoft. I'm sure (though I don't know what Microsoft demanded from Motorola in 2010) it's also a tiny fraction of what Microsoft would have wanted Motorola to pay in royalties.
A Seattle jury's $14.5 million damages award for breach of the duty of good faith and fair dealing will likely become enforceable in a matter of months, given that the United States Court of Appeals for the Ninth Circuit appeared, at a hearing held yesterday, unlikely to grant Google's wish for a reversal or retrial. After a panel opinion, Google could theoretically ask for a rehearing and/or file a petition with the Supreme Court. The former would hardly help, and the latter wouldn't make sense for Google, which has other priorities than this matter. So, all going as expected, it will be "game over" for the FRAND breach story soon.
As a part-time intercontinental litigation watcher who prefers not to travel I appreciate the Ninth Circuit's second-to-none degree of transparency. A video recording of the appellate hearing is available on YouTube (this post continues below the video):
Google previously appealed a decision in this case, from the Western District of Washington, to the Ninth Circuit: a temporary-restraining-order-turned-preliminary-injunction that barred Motorola from enforcing a couple of German patent injunctions. Google lost in 2012 and really, really didn't want to come back. But the Federal Circuit rejected Google's attempt at appellate forum-shopping, and yesterday Motorola's counsel, Quinn Emanuel's Kathleen Sullivan, had to face the very same panel as last time: Chief Judge Thomas, Senior (literally--he's 86) Circuit Judge Wallace, and the author of the 2012 opinion, Circuit Judge Berzon. The latter played by far the most active role on yesterday's bench, suggesting to me that she'll also write the next opinion.
None of the judges expressed any opinion on the (un)reasonableness of Motorola's 2010 royalty demand from Microsoft, which technically amounted to $4 billion a year. The focus was on the procedures that led to the jury trial and the verdict. But I can't imagine that the judges wouldn't consider it ridiculous, and there's no indication that they have a problem with District Judge Robart's FRAND rate-setting opinion, which came down to about one-twentieth of a percent of Motorola's original demand.
Google complains that the discrepancy between Motorola's initial demand (they still prefer to describe it as an "offer letter" and say Microsoft also rejects 99% of all initial licensing offers it gets) and Judge Robart's rate, which was presented to the jury as law of the case (so Google was unable to challenge the underlying rationale), was tantamount to a directed verdict. My interpretation is that the judges were telling Google between the lines: "It's your problem that the only conclusion at which the jury could arrive based on these numbers was unfavorable to you. That still doesn't mean Judge Robart treated you unfairly in the process."
I'm not surprised about that. However, I didn't expect the following: throughout the Seattle proceedings, Motorola had tried to stall and derail. It was against pretty much everything Judge Robart did, except when he denied some Microsoft motions. But the appeals court apparently can't find a clear and timely objection by Motorola to the course of events that resulted in a jury verdict against the background described before. The case was bifurcated (FRAND rate first, breach damages later), and Google now says that any consent was only limited to the possibility of the court creating an actual license agreement, not to an isolated rate-setting opinion (since there are various non-monetary terms that go into a full-fledged license agreement) that was subsequently used as law of the case in a jury trial on damages.
The judges indicated to Google's counsel that they disagreed with her, and nothing she said appeared to change that. By contrast, the message between the lines to Microsoft's counsel, Sidley Austin's Carter Phillips, was like "we agree with you and just want to be sure that we didn't miss anything important." You can see on the video above how comfortable he was with the overall situation.
Mr. Phillips stressed that the way Judge Robart introduced the rate-setting opinion into the jury trial and instructed the jury on breach was as favorable to Motorola as it could have been under the circumstances (one circumstance being that the rate determination was law of the case). I think that's right. Judge Robart didn't disadvantage Motorola, and he didn't do some things he could have done, such as granting Microsoft summary judgment on breach. This made it harder, or at least more time-consuming, for Microsoft to prevail. But it also upped the ante for Google's appeal, which became very clear yesterday.
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