Source: http://www.fosspatents.com/2014/02/
Timestamp: 2019-04-19 09:18:59+00:00

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Today the Bundespatentgericht (Federal Patent Court of Germany) held a hearing in the nullity action brought by Google subsidiary Motorola Mobility against the German part of Microsoft's EP0845124 on a "computer system for identifying local resources and method therefor", a patent asserted not only against Motorola Mobility's Android-based devices but also against the Google Maps service per se. The proceedings in the infringement case had been stayed to await this decision on validity, and based on today's court decision to declare the patent invalid (not only in its granted form but also all of the proposed amendments), there won't be an infringement trial until after the appeal (provided that it is successful) that counsel for Microsoft announced would be filed tomorrow. Bardehle Pagenberg's Dr. Tilman Mueller-Stoy ("Müller-Stoy" in German), Microsoft's lead counsel in the related infringement case and co-counsel at today's nullity hearing, told the Federal Patent Court about the immediate appeal shortly after the announcement of the ruling when communicating Microsoft's request that the written ruling issue at the earliest opportunity.
Usually patent holders file an appeal only after the Federal Patent Court's written decision, which comes down a few months after the nullity hearing (where the basic outcome is announced from the bench). But this patent is due to expire in the summer of 2015 and could give Microsoft significant leverage. It became very clear at today's nullity hearing that Microsoft's counsel (its lead counsel today was Bardehle Pagenberg's Peter Hess, a patent attorney) fundamentally disagreed with the court, especially (though not only) as far as their narrowing amendments were concerned. After the introductory remarks by the court's Second Nullity Senate reiterated the key points of a preliminary ruling communicated a few months ago, Mr. Hess, Dr. Mueller-Stoy and their colleagues Dr. Malkomes and Dr. Haupt had to fight an uphill battle against a Quinn Emanuel team led by Dr. Marcus Grosch (who was victorious today but may very well lose three Mannheim cases tomorrow, two against Apple and one against HTC, as counsel for IPCom [corrected; previously said HTC, a typo at the end of a long and tiring day]). Microsoft's lawyers made an admirable effort under extremely difficult circumstances, and it wouldn't surprise me in the slightest if they salvaged this patent (at least in a narrowed form) on appeal. Just statistically speaking, the reversal rate of Federal Patent Court decisions is very high. In nullity cases, it's more than 40% (provided that appeals are filed and actually adjudicated).
While 21 companies have taken royalty-bearing Android patent licenses from Microsoft, Google's Motorola Mobility still refuses to pay. None of Microsoft's offensive claims against Motorola Mobility, all of them filed in 2010, has gone to a U.S. district court trial yet (only its defensive claims involving FRAND issues). A German injunction involving Google Maps would have (had) the potential to bring about a near-term settlement.
While Microsoft and Google haven't been able to settle their patent infringement dispute so far, they do agree that it would be terrible policy for Europe, especially with a view to the growing problem of patent trolling, to allow Europe-wide injunctions to issue prior to ascertaining the validity of asserted patents. These two companies, as well as other industry leaders including the likes of Apple, Broadcom, Cisco and Samsung, reiterated their concerns over potential shortcomings of the rules of procedure of Europe's future Unified Patent Court in an(other) open letter published on Tuesday. It's an interesting coincidence that Microsoft and Google met in court during the same week and that a patent that almost resulted in an injunction last year was, though this could change on appeal, declared invalid. Google couldn't have complained too much if an injunction against Google Maps had issued before its invalidity defense was fully evaluated, given that Google capitalized on such an unfortunate situation against Apple for 19 months and tried the same (over the same patent) against Microsoft. But all of these major players agree that bifurcation (separate tracks for infringement and invalidity cases that can result in the enforcement of patents that shouldn't have been granted in the first place) is a bad idea. I hope the European Union's decision-makers will take their concerns seriously. These companies know what they're talking about.
In all of the smartphone-related patent disputes between major players that I watch, not a single patent has survived a Federal Patent Court hearing in its granted form. Most of them were invalidated entirely; others were narrowed. There could be some interesting developments in some of the related appeals.
I have seen several Korean news reports, of which I obtained machine translations (Google Translate), on an announcement today by the Korea Fair Trade Commission, South Korea's antitrust authority, that Apple's complaint against Samsung over its pursuit of injunctive relief over FRAND-pledged standard-essential patents (SEPs) was rejected. The KFTC found Samsung's conduct to be above board. One of the reports quoted an unnamed Apple official who expressed disappointment.
The KFTC had been investigating the matter since the summer of 2012 further to a complaint lodged by Apple in April 2012. The regulatory agency has now determined that Samsung is "not liable" for a violation of Korean antitrust law, called the Monopoly Regulation and Fair Trade law.
This wholesale acquittal contrasts with the state of FRAND antitrust matters in other jurisdictions. While I recently raised the question of whether regulators in the U.S. and EU are taking a soft line on SEP issues and answered it with "Yes!" as far as the DoJ's closing of its investigation of Samsung is concerned (because the issue is not moot at all, given that Samsung is still pursuing a U.S. import ban, through an appeal, and wants an injunction over the two SEPs it's going to assert at next month's California trial), the DoJ did at least say it would continue to monitor Samsung's behavior and reiterated concerns over SEP abuse. And the European Commission indicated in December that Samsung needs to make significant improvements to its proposal in order to reach a settlement. I'd like EU and U.S. regulators to look into some of the FRAND-related issues the Competition Commission of India has decided to investigate, but at least they haven't concluded Samsung's pursuit of SEP-based injunctions was lawful.
I do, however, attribute the outcome of the Korean antitrust case in no small part to the fact that regulators in the West failed to make much sharper decisions. The KFTC ruling appears to be far more SEP holder-friendly than anything the DoJ, FTC or European Commission ever indicated in this context, but unlike in August, when I wondered whether South Korea was on the verge of becoming a "FRAND rogue state", all I can say now is that basically the Korean competition regulators have taken the worst parts of certain Western rulings, positions and almost-accepted settlement proposals on SEP injunction issues, have taken those worst parts to a new level, and added at least one absurdity of their own to the mix.
The unprecedented absurdity I mean is that the KFTC determined Samsung did not have "essential facility" type monopoly power based on its SEPs because "more than 50 companies hold over 15,000 SEPs relating to 3G wireless communication (UMTS/WCDMA) technology", citing the Fairfield Resources International 2009 Report and noting that this constitutes a difference from case in which "only one essential facility exists". This makes no sense at all because any one SEP (if truly essential to the standard, of course) can force someone out of the market. As a Motorola expert witness once put it, "it only takes one bullet to kill". If Apple didn't need a license to Samsung's 3G SEPs on FRAND terms because it could, as it has, secure a license to, for example, Ericsson's SEPs reading on the same standard, then Samsung wouldn't have essential-facility power. But that's simply not the case. I don't think this reasoning is going to be adopted by any antitrust regulator anywhere else in the world anytime soon. Other regulators may well agree that "essential facility" theories aren't the best vehicle to address SEP abuse, but the existence of non-interchangeable SEPs held by other companies is not a reasonable basis to let SEP holders go ahead and pursue injunctive relief.
Another highly perplexing part of the KFTC's holdings is that Samsung's behavior is, in no small part, excused with the fact that "by first filing a patent infringement lawsuit", Apple was responsible for the overall "negotiation atmosphere" being determined by the characteristics of patent infringement litigation. In other words, Apple drew first blood. But Apple sued Samsung only over non-SEPs. I have explained on various occasions that and why SEP and non-SEP issues must be kept separate. To be fair, however, the KFTC was not the first government agency in the world to conflate those issues. Previously, that's what a majority of the ITC did as well, with only Commissioner Dean Pinkert dissenting (on a very well-reasoned basis). If the ITC as a whole had adopted the Pinkert stance on the issue, the Presidential veto of the U.S. import ban Samsung won last year would never have been necessary, and the KFTC would not have been encouraged to excuse SEP abuse with non-SEP enforcement. Non-SEPs can be worked around; true SEPs cannot. Non-SEPs are typically unencumbered; SEPs are subject to FRAND licensing commitments. But after the ITC majority failed to make that distinction, it's hard to blame the KFTC for merely taking SEP and non-SEP conflation to a new level. And the unfortunate course of events in the U.S. may very well have contributed to a political climate in which Korean officials weren't overly sympathetic to Apple's antitrust complaint against Samsung.
There's another reason not to describe Korea as a "FRAND rogue state", despite the parts of the KFTC's decision that I fundamentally disagree with. Korean media appear to be well aware of the fact that this decision is different from the conclusions reached elsewhere in the world on these issues, and at least one Korean law professor (who is also licensed as a U.S. attorney-at-law and patent attorney) said that while Samsung is entitled to royalties on its SEPs, seeking sales bans over them is "problematic". In the long run I believe the KFTC's conclusions won't benefit Korean companies and consumers either, even if this may be viewed as a win for Samsung in the short term.
In other FRAND news today, Reuters reports that Huawei has withdrawn its EU antitrust complaint against InterDigital. The European Commission had not launched formal investigations anyway, and won't do so now following the withdrawal of the complaint.
Four years ago people advocating the abolition of software patents made a lot of noise, including a movie named Patent Absurdity, about a case pending then before the Supreme Court of the United States: Bilski v. Kappos. They hoped that the Supreme Court would not only affirm the Federal Circuit's holding that Bilski and his co-inventor Warsaw weren't entitled to a patent on a risk-hedging business method, but that it would interpret 35 U.S.C. § 101, the statutory definition of which inventions are eligible for patent protection in the U.S. (applications must still meet all other patentability criteria such as novelty and non-obviousness), in a way that would render many, if not most or even all, software patents invalid.
The Supreme Court's June 2010 opinion fell far short of those hopes and expectations. The Bilski stuff was held patent-ineligible on the grounds of being too abstract, but the court declined to provide further guidance of the restrictive kind some had argued for. On page 9 of the Bilski ruling, a more restrictive approach was rejected because it "would create uncertainty as to the patentability of software, advanced diagnostic medicine techniques, and inventions based on linear programming, data compression, and the manipulation of digital signals". While that passage was based on a reference to amicus briefs submitted by pro-software-patent organizations, the way the SCOTUS refers to those concerns leaves no doubt that the justices who supported the passage agreed that the Bilski decision shouldn't cause collateral damage in those areas. At the very least it showed that the court had been perfectly aware of some people's abolitionist hopes and dreams, but declined their invitations to legislate from the bench on an issue it simply didn't have to reach.
Four years later history appears to be repeating itself as a result of the Supreme Court's grant of certiorari (i.e., decision to hear the case) in CLS Bank v. Alice. And I venture to predict a similar outcome: the ruling will, once again, be very narrow because, just like in Bilski, the facts of the case don't lend themselves to a decision of broad scope.
U.S. Patent No. 5,970,479 on "methods and apparatus relating to the formulation and trading of risk management contracts"
U.S. Patent No. 6,912,510 on "methods of exchanging an obligation"
U.S. Patent No. 7,149,720 on "systems for exchanging an obligation"
U.S. Patent No. 7,725,375 on "systems and computer program products for exchanging an obligation"
Don't be misled by words like "apparatus", "systems", and "computer program products". These are business method patents, not software patents in the sense of patents relating to software, or "computer-implemented" (another term that appears in those patents), innovation. The Alice patents relate to the very basic idea of having a third party ensure, like an escrow, that a transaction between two parties only takes place if the mutual obligations are met. That's what Alice seeks to monopolize. Some of these claims are downright business method claims (though the parties stipulated before the district court that they should be interpreted as requiring computer implementation); the others are business method claims camouflaging as system or program claims.
(1b) those who would probably invalidate the Alice patents anyway on non-novelty or obviousness grounds, but who don't want § 101 to be the vehicle for invalidation.
The second group already wanted Bilski to result in a restrictive ruling that didn't happen then and won't happen now.
"Whether claims to computer-implemented inventions--including claims to systems and machines, processes, and items of manufacture--are directed to patent-eligible subject matter within the meaning of 35 U.S.C. § 101 as interpreted by this Court?"
"Can an otherwise-unpatentable abstract business method be patented in circumvention of 35 U.S.C. § 101 by mentioning magic words such as 'computer-implemented', 'computer' or 'program' in the claims?"
While honest, this would be a no-go, which is why Alice prefers to blow things out of proportion.
Circuit Judge Newman, who dissented from the Federal Circuit's majority in Bilski and wanted even that ultra-abstract patent application to pass the test, may also be part of this group. She may be more comfortable than others with the notion of a patent system without any meaningful boundaries.
At the end of an even more alarmist footnote, she writes: "There has never been a case which could do more damage to the patent system than this one."
Statements like these do nothing to discourage abolitionists from filing briefs in this context. But the actual intention of this 1b group of people is to warn against excessive use of § 101 (as opposed to other means of killing bad patents). Just like Alice and its fellow proponents of business method patents, they feel that the specter of software patent abolition will scare U.S. judges, who are well aware of the significance of the IT industry to the American economy. That agenda still doesn't change the substance of Alice's patent claims.
"Indeed, that failure [by the Fed. Cir.] to provide guidance led to a wrong and dangerous ruling in WildTangent, Inc. v. Ultramercial LLC, et al., No. 13-255. A petition for certiorari in that case is also currently pending before this Court; amicus believes that the WildTangent case would provide a better vehicle than this one to resolve how Section 101 applies to computer-implemented inventions. Brief of Amicus Curiae Electronic Frontier Foundation in Support of Petitioner, WildTangent, Inc. v. Ultramercial, LLC, et al., No. 13-255. However, the question surrounding the scope of Section 101 needs to be addressed by this Court, and this case, too, provides an opportunity for that to happen."
So the EFF admits that CLS Bank v. Alice is a suboptimal context for raising the issue of software patent-eligibility. By the way, the patent at issue in the WildTangent case relates to advertising-financed online video viewing. It's also a business method patent, though it involves a digital media business as opposed to a financial services business.
I wouldn't read too much into the fact that the Supreme Court accepted to take a look at CLS Bank v. Alice. The Federal Circuit was hopelessly divided. It affirmed the decision to invalidate all of Alice's asserted claims, which I agree with the EFF was the right outcome, but only on the basis of affirmance by an equally divided court, not a substantive decision that received majority support. Only a minority of the circuit judges would have upheld the method patent claims. But there was also a majority that argued the method and system claims should rise or fall together -- and a few judges actually wanted to uphold the method claims as well. Regardless of whether the Supreme Court necessarily finds any important issue in CLS Bank v. Alice that goes beyond Bilski, it may have seen a need to speak out on this difficult issue.
We do not discount Amici's concerns, we just disagree with what they ask us to do to quell them. Congress can, and perhaps should, develop special rules for software patents. It could, for instance, limit their life by limiting the term of such patents. [...] Or, Congress could limit the scope of software patents by requiring functional claiming. Or, it could do both, or devise some other rule. But broadening what is a narrow exception to the statutory definition of patent eligibility should not be the vehicle to address these concerns. While Congress may, this court may not change the law to address one technological field or the concerns of a single industry."
"The concept of reducing settlement risk by facilitating a trade through third-party intermediation is an abstract idea because it is a 'disembodied' concept, [...] a basic building block of human ingenuity, untethered from any real-world application."
"Apart from the idea of third-party intermediation, the claim's substantive limitations require creating shadow records, using a computer to adjust and maintain those shadow records, and reconciling shadow records and corresponding exchange institution accounts through end-of-day transactions. None of those limitations adds anything of substance to the claim."
"First, the requirement for computer implementation could scarcely be introduced with less specificity; the claim lacks any express language to define the computer's participation."
"Furthermore, simply appending generic computer functionality to lend speed or efficiency to the performance of an otherwise abstract concept does not meaningfully limit claim scope for purposes of patent eligibility. [...] That is particularly apparent in this case. Because of the efficiency and ubiquity of computers, essentially all practical, real-world applications of the abstract idea implicated here would rely, at some level, on basic computer functions--for example, to quickly and reliably calculate balances or exchange data among financial institutions. At its most basic, a computer is just a calculator capable of performing mental steps faster than a human could. Unless the claims require a computer to perform operations that are not merely accelerated calculations, a computer does not itself confer patent eligibility."
"Whether the instructions are issued in real time, every two hours, or at the end of every day, there is no indication in the record that the precise moment chosen to execute those payments makes any significant difference in the ultimate application of the abstract idea."
If the Lourie opinion had become precedent (which it has not) or if this line of reasoning became effectively precedent after the SCOTUS decision, the paragraphs I quoted above (and they are just a subset of what could have been selected) contain more than enough ammunition for those defending or upholding true software patents -- for one example, patents on software techniques that enhance performance.
"[D]o the limitations of the claim, including any computer- based limitations, add 'enough' beyond the abstract idea itself to limit the claim to a narrower, patent-eligible application of that idea? Or, is it merely a Trojan horse designed to enable abstract claims to slide through the screen of patent eligibility?"
The SCOTUS can close the door to Trojan horses without abolishing software patents. I guess it will find a way to do the former without collateral damage. It carefully avoided unintended consequences in Bilski. There may be even more noise now than there was four years ago, but U.S. substantive patent law hasn't changed since.
Last week I asked: "Are U.S. and EU antitrust enforcers taking a rather soft line on standard-essential patent issues?" Based on a Samsung filing with the United States Court of Appeals for the Federal Circuit that entered the public record yesterday, I must answer this question with a resounding "Yes!" as far as the Antitrust Division of the United States Department of Justice (DoJ) is concerned. Basically, Samsung's filing makes clear that it seeks to benefit from reverse protectionism in which I believe the U.S. government is engaging for geopolitical reasons that have nothing to do with Apple, phones, tablets, or patents.
Only two weeks have passed since the DoJ announced the closing of its investigation of Samsung's use of FRAND-pledged standard-essential patents (SEPs) against Apple, arguing that "[a]s a result of the [Obama Administration's veto of an import ban Samsung won last year], the Antitrust Division has determined that no further action is required at this time". The fundamental importance of the underlying issue to industry would have been enough of a reason to penalize Samsung even for a failed attempt to win an import ban over a SEP. The European Commission has not closed the Samsung investigation yet even though Samsung also failed with its related attempts in multiple European countries. The U.S. government, however, apparently wanted to avoid the impression of dual punishment (veto plus antitrust decision).
Even on that basis, it was just totally premature to "close" the investigation (except for keeping the door open very slightly by promising to continue to monitor the situation) without remedies of any kind. If this was about SEPs as opposed to foreign policy, the DoJ would have expected at a very minimum that Samsung withdraw all of its still-pending requests for injunctive relief against Apple over U.S. SEPs. In December 2012, Samsung dropped its European SEP-based injunction requests against Apple in an effort to pave the way for a settlement with the European Commission and to avoid or minimize fines. It never did this in the U.S., so it would have been anything but unreasonable for the DoJ to close its investigation of Samsung only after similar withdrawals. Again, foreign policy is the only plausible explanation for why the DoJ did not demand this.
"That Apple and its officers, agents, servants, employees, and all those persons acting or attempting to act in active concert or in participation with them or acting on their behalf be immediately, preliminarily and permanently enjoined from further infringement of Samsung's Patents In Suit;"
Prior to the DoJ's closing of the investigation, Samsung should have withdrawn that request -- which is exactly the kind of request it dropped Europe-wide -- with respect to the two SEPs it's taking to trial (for the non-SEPs it's obviously free to pursue such relief).
On November 1, 2013, the public redacted version of Samsung's appeal of the unfavorable parts of the ITC ruling on its complaint against Apple became available. The veto was not appealable, but the ITC had sided with Apple on one more SEP and a couple of non-SEPs. It turned out that Samsung is pursuing on appeal only one patent: a FRAND-pledged SEP. In my commentary I thought Samsung primarily did this with a view to a damages claim in federal court (in Delaware, where its mirror lawsuit of the ITC complaint was filed) and possible FRAND determinations in which it would want to argue that the patent is still alive. I said it would "be a long shot to win an import ban (on the remand it seeks) in light of the last veto (though not 100% impossible if the FRAND-related facts changed in the meantime, such as new offers made in negotiation that might warrant a new public interest analysis down the road, most likely in 2015)".
In its recent answer brief to Samsung's appeal, Apple raised FRAND issues and argued that, in light of the last veto, Samsung's appeal should be tossed because Samsung won't be able to win the only type of remedy the ITC can order. The ITC itself merely defended its non-liability finding. I saw those briefs a few weeks ago but decided to wait until Samsung's reply brief before blogging about them. I wanted to see what position Samsung takes on Apple's FRAND arguments, and that's what the remainder of this blog post is about. Samsung is indeed arguing the way I suspected it would (i.e., that it can win an import ban on remand, should the appeal succeed on liability), and this shows that the DoJ should never have closed the investigation without Samsung withdrawing that Federal Circuit appeal or at least clarifying that the purpose of the appeal was just to get the non-liability holding reversed, with a view to damages and royalty determinations (though this might have supported certain mootness arguments by Apple).
The Commission properly rejected Apple’s claims that Samsung's commitment to standards-setting organizations precluded an exclusionary remedy for the '644 Patent. As the Commission noted, Apple identified no per se rule barring the ITC from issuing an exclusion order on a FRAND-encumbered patent. [...] In particular, the Commission noted that ETSI's IPR policy does not prohibit patent owners from seeking injunctive relief, and that several attempts to add such language have failed. [...] Although Samsung does not dispute that exclusionary relief ought to be a last resort when declared essential patents are asserted, it cannot be the case that an accused infringer can avoid the ITC's statutory mandate by simply raising FRAND concerns while refusing to 'engage in an impartial and honest Essential IPR licensing negotiation process,' as ETSI expects of its members. [...] As described below, that is exactly what the Commission concluded Apple did here.
To the extent the '644 Patent is subject to a FRAND licensing commitment, the Commission also correctly determined that Apple had failed to show that Samsung did not satisfy that obligation. [...] Over the course of three years, beginning before the underlying Investigation was commenced, Samsung sought in good faith to license its UMTS patents, including the '644 Patent, to Apple on FRAND terms and conditions. [...] Apple rejected every offer and never made any serious counter-offer. [...] Although Apple's brief refers only to certain unilateral license offers proposing [[REDACTED]], Apple conspicuously fails to mention Samsung's December 2012 proposal for [[REDACTED]] Apple's rejection of license terms that it previously suggested were FRAND, combined with its refusal to make a counteroffer or otherwise reasonably engage in further licensing negotiations, confirms that Apple is not negotiating in good faith, and does not intend to license Samsung's patents unless compelled to do so. [...] It was this inexplicable unwillingness to license on any terms that prompted the Commission to characterize Apple's approach as 'reverse patent holdup' in which 'an implementer utilizes declared-essential technology without compensation to the patent owner under the guise that the patent owner's offers to license were not fair or reasonable.' [...] Even Apple's cases agree that exclusionary relief is appropriate in these circumstances. See Apple, Inc. v. Motorola, Inc., 869 F. Supp. 2d 901, 914 (N.D. Ill. 2012).
Unable to demonstrate that Samsung is not entitled to exclusionary relief as a matter of law, Apple contends that a remand with respect to the '644 Patent would be futile because the USTR would likely veto an exclusion order if granted, as it did for Samsung's '348 Patent. As an initial matter, Apple cannot ask this Court to usurp the function of the executive to conduct policy evaluations of Commission determinations by denying relief that is otherwise appropriate under the ITC's statutory mandate and this Court's precedent. Moreover, Apple overstates the USTR's position with respect to the '348 Patent.
The USTR did not conclude that exclusion orders are never appropriate for declared essential patents; rather, the USTR stated that 'whether public interest considerations counsel against a particular exclusion order depends on the specific circumstances at issue,' such as the infringer’s refusal to take a FRAND license. [...] (emphasis added). The USTR's disapproval of the '348 Patent exclusion order was based on the lack of 'a comprehensive factual record' and 'explicit findings' regarding issues such as 'the presence or absence of patent hold-up or reverse hold-up.' [...] Any deficiencies in the record or the Commission's findings can be easily addressed on remand, allowing the USTR to confirm that standards-related concerns have been adequately considered, and that any issued exclusion order will not implicate public policy concerns."
I agree with Samsung -- as I already did in my commentary on its opening appellate brief -- that the USTR veto was not broad enough to make it 100% impossible for Samsung to win an import ban on a potential remand. I also agree with Samsung that Apple's brief somewhat overstated the scope of the USTR veto. But on that basis, I can't agree with the DoJ's decision to "close" the investigation. The issue was not and is not moot.
It's a well-known fact that (good) lawyers treat each other as colleagues, not adversaries, despite their best efforts to defend their clients' interests vigorously. The relationship between Nokia and HTC's German outside patent litigators and patent attorneys stands out nonetheless. After roughly six years of jointly defending against patent licensing firm IPCom, they are on unusually friendly terms, and this did not change in the slightest as a result of the dispute between Nokia and HTC that lasted almost two years (April 2012 - February 2014) and had its center of gravity, in terms of the number of asserted patents and decisions handed down, in Germany.
This evening, approximately 30 of the 50 attorneys-at-law and patent attorneys involved with the German part of the Nokia-HTC dispute gathered for a drink in a spacious conference room in the Dusseldorf office of Hogan Lovells, at the invitation of HTC's lead outside attorney in Germany, Dr. Martin Chakraborty. I had the pleasure and the honor of making a surprise appearance as a keynote speaker. Dr. Chakraborty had this idea, I accepted the invitation, and we had not told anyone about it beforehand.
Since I had attended most of the German hearings and trials in this dispute over these past two years, I was uniquely positioned to provide an anecdotal recap and share certain observations on the occasion of this unusual celebration. I did this for two reasons. One, I have the greatest respect for both camps' legal work. In absolute numbers, this dispute produced various records with respect to the smartphone IP matters I monitor and even beyond. Offensively and defensively. It was a clash of Titans. Two -- and this was no less important to me personally --, I know that HTC and its lawyers found themselves in disagreement with my commentary more frequently than Nokia did, but I do respect both companies (over the years I've taken increasingly favorable positions on HTC's approach to patent litigation) and appreciated this opportunity to show it.
Now that the dust has settled and a deal has been struck, I sincerely hope that the deal terms (which are entirely unknown to me) will help both parties as they pursue their (now-divergent) business models. They face challenges without a doubt, but they also have opportunities.
In my (relatively short) address I mentioned that one of the intriguing aspects of this spat was the diversity of the patents-in-suit: pretty much everything patentable in the mobile devices industry from A as in "antenna" to U as in "USB" -- only to be reminded that V as in "VP8" (Google's video codec) had also been at issue.
For the sake of a complete record of who was involved with this massive effort I'm now going to list both parties' law firms in alphabetical order (firstly Nokia's since this was also the party that started it).
Liberty Media's TruePosition acquires Skyhook, touts its patents: implications for Google lawsuit?
Skyhook Wireless, a company that has been suing Google for more than three years over various location-positioning patents, with a trial likely to take place (finally) this year, has just been acquired by Liberty Media's TruePosition subsidiary. The official announcement says that "Skyhook's technology provides TruePosition with another important tool in [its] technology and patent portfolio that perfectly complements [its] existing offerings" (emphasis added).
As Re/code mentions in its report on the deal, the [Skyhook-Google] court battles have revealed all sorts of interesting information about the control Google has exerted over the Android ecosystem". Google's heavy-handedness concerning Android drew a lot of additional attention last week after Google's mobile app distribution agreements with Samsung and HTC were published. Also last week, Galen Gruman wrote on Infoworld: "Meet AOSP, the other [i.e., open-source] Android, while you still can", going on to explain how an increasing part of the Android codebase is closed and the open-source components are nearing the point at which they won't represent a competitive mobile operating system.
It's too early to tell what effect Liberty Media's acquisition of Skyhook Wireless will have on the pending Google patent litigation. If the case does go to trial this year, Google will face a well-heeled opponent that can afford even more protracted litigation and (even international, if necessary) escalation. But the "If" is the question. While it would make sense for Liberty Media to aggressively enforce Skyhook's IP (which was apparently the reason for the deal) in order to monetize what it has acquired, it's also possible that Skyhook's new owners will be more willing to settle the matter with Google. But even if Liberty Media is prepared to settle, Google is not known to be exceedingly willing to pay patent royalties, so the case may have to go to trial anyway. It wouldn't be logical for Liberty Media to acquire IP and tout it in a press release only to dismiss a case without getting royalties. In doing so it would devalue Skyhook's patent portfolio and call into question the rationale for the transaction. So I think there still is a fairly high probability of the case going to trial.
A week ago I reported and commented on Samsung's motion to dismiss the patent infringement lawsuit brought against it by the Rockstar Consortium and its MobileStar Technologies subsidiary in the Eastern District of Texas. The next day ASUSTeK brought a motion raising the same issues (alleged invalidity of one patent and, which has potentially broader implications, lack of standing at the time the lawsuit was filed). Yesterday HTC, LG and Pantech followed suit. Technically, due to the AIA's joinder rule, each defendant faces a different Rockstar lawsuit, though the issues are near-identical, except that the case Rockstar brought against Google itself (apart from the fact that Google was later added as a co-defendant to the Samsung case) is about search engine patents.
Of the seven Android device makers sued on Halloween, one (Huawei) has settled, five (firstly Samsung, then ASUSTeK, HTC, LG, Pantech) have brought motions to dismiss, and one (ZTE) has yet to respond. Presumably ZTE will also move for dismissal, unless it settles before.
What we're seeing here is just the overture in the form of a venue fight. Google filed a declaratory judgment action in the Northern District of California shortly before Christmas. Google's partners are meanwhile trying to get the Texas cases dismissed, which would make the California action the first-filed case. At the same time, Rockstar is trying to win the dismissal of the California lawsuit, arguing that there's no point in litigation in two districts "when a single suit in Texas, combined with six existing suits in Texas, can fully safeguard Google's interest".
In each case in which a motion to dismiss should fail, we're going to see a motion to transfer venue. In its reply brief in California, Rockstar has already described a transfer motion as "the predictable next step should this [California] case survive a motion to dismiss", and Rockstar and MobileStar "of course, reserve the right to file such a motion, if necessary, at an appropriate time".
From what I heard (from a major industry player who is neither a client of mine nor a party to Rockstar's Google/Android-related cases), Judge Rodney Gilstrap, who is presiding over the Rockstar-Android cases in Texas, is notoriously unwilling to transfer cases out of his court to other districts, but some defendants have apparently won such transfers through petitions for writ of mandamus filed with the Federal Circuit. We may very well see one or more mandamus petitions in this context as well. I believe these defendants won't leave a stone unturned in their attempts to move the matter out of Texas.
Throughout its opposition, Google argues that the asserted patents in this action and the Texas litigation concern solely the Android operating system. [...] This is misleading and mistaken. Rockstar and MobileStar are accusing various mobile devices that, while including the Android operating system, also include hardware and software components that infringe Rockstar and MobileStar patents, not the Android operating system alone. [...] For example, at least one patent (U.S. Patent No. 5,838,551) asserted against these mobile devices in the Texas actions has nothing to do with their operating system, but is directed solely to a type of component contained in those devices.
For this reason, Google is mistaken in invoking the customer-suit exception to the first-to-file rule. That exception applies only 'where the first suit is filed against a customer who is simply a reseller of the accused goods, while the second suit is a declaratory action brought by the manufacturer of the accused goods.' [...] Here, the Texas defendants are not resellers of devices or Android operating systems obtained from Google, but rather design, manufacture, and sell the devices themselves (which use the Android operating system). [...] This is hardly the situation of a patentee taking advantage of a customer who unknowingly purchased an infringing product from a manufacturer.
In any event, Google cannot have it both ways. If Google wishes to paint the Texas litigation as a direct assault on Google itself, then Google cannot plausibly hold out this suit as the 'first-filed' case. It is undoubtedly the second-filed case under any logical view of the substance of each suit."
The '551 patent covers an "electronic package carrying an electronic component and assembly of mother board and electronic package", which is obviously Android-unrelated. I'm still going to refer, for the sake of brevity, to these cases as the "Rockstar Android lawsuits" because all defendants have in common that they make Android-based devices and because most of the asserted patents are allegedly infringed by Android itself. When I say "Rockstar Android lawsuits", I mean "Rockstar's lawsuits against six (originally seven) Android OEMs". But for the legal question of whether a dismissal or transfer is warranted, the distinction must be made, and I do agree with Rockstar that Android device makers -- rather large and sophisticated companies, by the way -- can't be compared to the targets of typical customer suits such as hotels or restaurants offering WiFi access.
The potential scope and usefulness of a customer suit exception is also a hotly contested issue in the ongoing U.S. patent reform debate.
In early November 2013, the Subcommittee on Consumer Protection, Product Safety, and Insurance (part of the Committee on Commerce, Science, and Transportation) of the United States Senate held a hearing on possible measures against deceptive demand letters by patent trolls. It remains to be seen what will ultimately come out of this effort at the federal level, but a state legislature is at the forefront of this issue. On Thursday, the Judiciary Committee of the Kentucky Senate voted unanimously in favor of a bill (SB116) that seeks "to establish a bad-faith assertion of patent infringement as a violation of Kentucky's consumer protection chapter and authorize the utilization of the remedies available for those violations in addition to private remedies established in the bill".
The bill was introduced by Republican State Senators Christian McDaniel and Whitney Westerfield (personal website, website of his law office). Whitney is the chairman of this committee and a reader of this blog (in general, not only in with respect to patent policy). He kindly informed me of these developments via Twitter.
This is the most comprehensive effort I've seen so far to lay out factors weighing for and against allegations of bad-faith patent assertions. Clearly, a lot of thought has gone into the design of a bill (Word document) that aims to make a distinction between good-faith and bad-faith patent licensing activities. It's similar to a bill enacted by the Vermont Legislature last year.
The bill mentions that the state Attorney General is not meant to be restricted by this bill in any way, but the bill itself focuses on a defendant's right in bad-faith litigation or litigation following bad-faith demand letters. Paragraph 3 ensures that defendants have a basis for demanding a bond at any stage of the proceedings ("[u]pon motion by a target and a finding by the court that a target has established a reasonable likelihood that a person has made a bad-faith assertion of patent infringement").
A demand letter fails to state the patent number, the name and address of the patent owner(s)/assignee(s), or specific factual allegations relating to the infringement claim.
A patent holder fails to conduct a reasonably specific infringement analysis prior to sending a demand letter.
Information reasonably requested by the taret of a royalty demand is not provided within a reasonable period of time.
The roaylty demand is not based on a reasonable valuation.
The claim is meritless and the patent holder knew or should have known this.
The claim or assertion is "deceptive" (not defined).
Previous behavior and litigation can affect subsequent actions (for example, earlier demand letters that failed to satisfy the criteria laid out in the bill).
The patent holder is a non-practicing entity.
The demand letter contains the information the bill requires.
If the original demand letter did not contain it, the patent holder may still be able to cure the defect by providing the information, on request, within reasonable period of time.
The patentee "engages in a good-faith effort to establish that the target has infringed the patent and to negotiate an appropriate remedy".
Substantial investment in use of patent or in production or sale of product or item covered by it.
The anti-NPE assumption is counterbalanced by assumptions in favor of patent holders or original assignees who enforce a patent themselves, and institutions of higher education and any technology transfer entities they own.
Previous behavior can be helpful to a patentee if he previously demonstrated good-faith business practices in enforcement of the same patent or a substantially similar one, or successfully enforced the patent or a substantially similar patent through litigation.
Patent law is part of federal law, and I don't want to get into a discussion here of ways in which state laws can indeed have a bearing on patent infringement litigation. I just wanted to draw additional attention to this truly interesting effort, and I hope that something will be done at the federal level -- and at some point over here in Europe as well -- against bad-faith demand letters. The Kentucky bill is definitely a valuable and constructive contribution to the debate. Should it have a statistically identifiable effect after being passed into law (which I hope) in terms of discouraging assertions against Kentuckians, then I'm sure other legislatures will consider similar measures. Ideally the pressing problem of bad-faith demand letters would be addressed by others even before.

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