Sisvel subsidiary 3G Licensing wins jury verdict against HTC in Delaware: per-patent per-unit royalties of 37 and 43 cents; pool license would have been cheaper

[PRELIMINARY NOTE] Let me note upfront that this is one of the last articles--possibly the penultimate one--that I'll ever publish on FOSS Patents. That doesn't mean FOSS Patents will disappear immediately: it remains available as an archive for a limited transitional period and may very well be used by others than me in the future. Nor will I personally disappear, but in the nearest term I will focus on writing a book about the Microsoft-ActivisionBlizzard merger saga, which became the most spectacular turnaround in merger regulation history and gave rise to a decision by a U.S. federal judge that communications between Microsoft and me were not a legitimate subject of pretrial discovery (as I mentioned toward the end of this recent post). I am going to remain interested in patent litigation and patent policy, as I have been for almost 20 years by now, but I have various new ideas and have to decide which ones to pursue, how, and when. I'll say something more in my final FOSS Patents post. As I'm also in the midst of relocation, this is a time of change and fresh new starts for me. [/PRELIMINARY NOTE]

Damages verdicts over standard-essential patents (SEPs) are rare because most SEP licenses are granted without litigation and in the few cases where infringement actions are filed, settlements typically occur ahead of any damages trial. But yesterday was one of those exceptional days: 3G Licensing, a subsidiary of patent pool administrator and licensing firm Sisvel, prevailed in the District of Delaware on two--based on the company's name, guess what--3G patents over mobile device maker HTC.

On a per-patent per-unit basis, the damages figure that was awarded shows that SEP infringement can get a lot costlier than licensing. 3G Licensing prevailed on two patents-in-suit, U.S. Patent No. 7,995,091 on a "mixed media telecommunication call manager" and U.S. Patent No. 6,856,818 on a "data store for mobile radio station." The damages verdict is so granular that it makes a distinction for the '818 patent between "Verizon Accused Products" and "Google-Fi [a mobile virtual network operator] Accused Products":

• For the '091 patent, 3G Licensing was awarded $0.37 per product, amounting to $7,228,042.13 for a total quantity of 19,535,249 infringing products.

• For the '818 patent, the royalty is again $0.37 per product with respect to 2,551,265 units of the Verizon Accused Products (a total of $943,968.05), and $0.43 for each of 1,84,295 infringing products that are Google-Fi Accused Products (a total of $795,196.85).

• In total, that's almost exactly $9 million.

• 3G Licensing obviously participates in Sisvel's 3G/4G mobile communications patent licensing program, and the published "compliant rate" (for willing licensees) that applies to 3G UMTS is just €0.35. That's $0.37 for the entire pool (all relevant patents from multiple patent holders)--but here it's the amount that the jury now found HTC owes on a per-patent per-unit basis, with the number being even higher for the Google-Fi Accused Products. The complaint mentioned that 3G Licensing was open to bilateral as well as pool licensing.

That litigation has been going on since 2017, following (according to the complaint) extensive but fruitless efforts to work out a negotiated agreement. I wasn't following it, but now that this interesting verdict has come out, someone may wish to take a closer look at the history of the case. The dispute is also instructive with a view to the debate over the EU SEP Regulation: I've been saying since earlier this year that any attempt by the EU to encourage and enable hold-out in its own courts will make other jurisdictions more attractive, and I mentioned U.S. damages verdicts as another way for SEP holders to stop infringement. There is nothing an EU regulation could lawfully (and without violating international trade agreements) do to prevent patent holders like 3G Licensing from enforcing their rights in the United States, where damages verdicts can become costly for infringers.

For now, let me just show you the public redacted version of the jury verdict. There's actually a typo in the verdict form concerning the number of the '091 patent that I noticed, but it was easy to find the correct one based on the complaint.

3G Licensing v. HTC (case no. 17-cv-83-GBW, D.Del.): verdict form (public redacted version)

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Patent exhaustion can be triggered by covenant to sue last: Germany's Federal Court of Justice creates legal uncertainty for wireless patent holders such as Qualcomm

The global ramifications for the patent licensing industry are huge:

Patent holders who enter(ed) into agreements with chipset makers and other suppliers while hoping to reserve the enforcement of their rights against downstream customers--particularly for the purpose of collecting royalties from end-product makers--can no longer rely on a covenant to sue last (sometimes also called covenant to exhaust remedies) as a means of sidestepping patent exhaustion.

I'm grateful to German IP litigator Oliver Loeffel ("Löffel" in German) for flagging the following decision to me:

The Bundesgerichtshof (Federal Court of Justice of Germany) today published (PDF) a judgment (dated January 24, 2023) according to which

• a covenant not to sue is, as a matter of law, not capable of circumventing patent exhaustion; and

• a covenant to sue last (which the court refers to as a "covenant to be sued last", a term that I can't find elsewhere and which doesn't make sense to me linguistically) is not, as a matter of law, certain to avoid exhaustion. Instead of focusing on what might theoretically happen (i.e., that there are hypothetical scenarios in which the beneficiary of the covenant to sue last might find itself on the receiving end of an infringement action), it depends on the answer to the following question of fact: whether the beneficiary of the covenant must realistically expect--in the ordinary course of events--to be held liable for infringement.

This may also have implications (in the sense of potentially persuasive authority) for other jurisdictions. With a view to the United States, the first part is merely consistent with TransCore, Quanta, and the spirit of Impression Products, but the second part touches on what would raise a question of first impression in the Supreme Court. So far, patent holders such as Qualcomm were pretty confident that a covenant to sue last would not entail patent exhaustion under U.S. patent law. While persuasive authority from a foreign jurisdiction is normally given limited weight, Germany's Federal Court of Justice actually has a reputation for being patentee-friendly, and its patent-specialized judges regularly meet with the judges of the United States Court of Appeals for the Federal Circuit.

The relevant case numbers are X ZR 123 (Federal Court of Justice), 6 U 104/18 (Karlsruhe Higher Regional Court, appellate opinion of November 25, 2020), and 7 O 165/16 (Mannheim Regional Court, judgment of September 28, 2018). The plaintiff (and appellee, at least in the Federal Court of Justice) is Japan's IP Bridge, the defendant is HTC, and the patent-in-suit is EP2294737 on "control channel signalling for triggering the independent transmission of a channel quality indicator", a patent that has been asserted against various defendants and over which IP Bridge won a famous German patent injunction against Ford last year.

The law firm of Kather Augenstein (which by the way represented Ericsson against Apple last year) published an English translastion of key passages of the Mannheim court's decision (PDF). I have not been able to find the appellate decision, though it has been referenced by IAM (as a key post-Sisvel v. Haier FRAND ruling) and even by this blog (because the Munich I Regional Court applied the Karlsruhe Higher Regional Court's claim construction in the Ford case, though it is not even in the Karlsruhe circuit).

Previously, no one paid much attention to the question of patent exhaustion. But the Federal Court of Justice--after siding with IP Bridge on the question of infringement--has now remanded the case to the Karlsruhe court (Presiding Judge: Andreas Voss ("Voß" in German)) because the patent-in-suit may have been exhausted by a covenant to sue last. As a result, it is now known that HTC--on top of technical defenses and a FRAND defense to injunctive relief--argued that the patent had been exhausted (maybe by IP Bridge, or maybe by Panasonic, which originally obtained this patent) through contracts with two chipset makers whose products were incorporated into the accused products (HTC smartphones).

This is a very special subject, so let me start with why such a thing as a covenant to sue last exists in the first place, and then discuss the holdings of the Federal Court of Justice in this case.

The instrument that is called covenant to sue last (or covenant to exhaust remedies) was borne out of necessity: Qualcomm and other patent holders (primarily wireless standard-essential patent (SEP) holders) have always preferred to license their patents to smartphone makers (and, more recently, automakers) over licensing them to upstream suppliers such as baseband chipset makers. But they'd also like to be able to enter into contractual arrangements with chipmakers so long as those dealings don't trigger patent exhaustion, which would make it impossible to enforce patent rights against the downstream, particularly the end-product maker.

They knew early on that a contractual provision would not be capable of preventing exhaustion when a straightforward license is granted. The concept of patent exhaustion is that patent rights are exhausted with the first sale (if the patent holder makes a product) or the first authorized (licensed) sale. The German decision published today also recalls that fact.

So the first "workaround" that lawyers came up with was to enter into a covenant not to sue instead of granting a license. For some time, there was widespread belief that this would do the trick. But over the years, the U.S. Supreme Court's patent exhaustion caselaw became more expansive. The 2008 decision in Quanta Computer v. LG Electronics clarified that patent exhaustion applies to method claims (as opposed to only product claims). In Impression Products v. Lexmark International, the top U.S. court held that post-sale restrictions may be enforceable under contract law but do nothing to avoid patent exhaustion. It also took an expansive view on whether a foreign first authorized sale will exhaust U.S. patent rights.

Between Quanta and Impression, the Federal Circuit equated, in its TransCore decision, a covenant not to sue to a license for exhaustion purposes, The instrument of a covenant to sue last became popular. This is how it works:

• The beneficiary neither gets a license nor a 100% reliable commitment not to be sued.

• But recovery will be sought from the beneficiary only if it cannot be obtained from the downstream.

Take automotive patent licensing, for example. If Nokia had (which I believe is not and was not the case) entered into a covenant to sue last vis-à-vis the chipmaker, it would only have been able to sue that company after seeking and failing to obtain recovery from Daimler (end-product maker), Continental (tier 1 supplier that makes telematics control units), and whatever tier 2 supplier supplied the Network Access Device (NAD) to Conti.

In the dispute between IP Bridge and HTC, the former succeeded in persuading the appeals court (Karlsruhe Higher Regional Court) that a covenant not to sue would already be sufficient to avoid patent exhaustion and, therefore, a covenant to sue last was even more certain to do the job.

HTC appealed, and the Federal Court of Justice (which is based in Karlsruhe like the court below) reversed and remanded with the following holdings and instructions:

• The Federal Court of Justice said it was not merely an obiter dictum that the Karlsruhe Higher Regional Court said a covenant not to sue would not trigger exhaustion. Instead, it was the bedrock of the lower court's conclusion that a covenant to sue last could not result in patent exhaustion either.

• The Federal Court of Justice says the focus must be on whether the patent holder has authorized the "release into commerce" ("Inverkehrbringen") of products that implement the patented invention. Typically, that will be the case if the patent holder entered into a covenant not to sue, and contractual provisions according to which the patentee reserves its rights against third parties are invalid.

• As a result, the Karlsruhe Higher Regional Court's conclusion that a covenant to sue last does not exhaust patent rights because even a covenant not to sue would not trigger exhaustion has been reversed.

• The Federal Court of Justice then turns to questions that the court below didn't have to reach:

• On remand, the Karlsruhe Higher Regional Court will have to determine whether the patent-in-suit falls under the capture clause of the patentee's relevant contracts with the two chipmakers.

• Patent exhaustion is not ruled out only because the chipmakers don't make phones and the patent claims-in-suit involve technical components that are not found in chips, but only in phones. The Federal Court of Justice acknowledges that patent exhaustion generally applies only to the particular product that was sold on an authorized basis. Exhaustion does not necessarily apply to downstream products that contain that product as one of multiple components. But that may be the net effect if the only meaningful way in which the chipsets in question can be used is to incorporate them into mobile end-user devices. In that case, the patentee's authorization of the sale of such chipsets may amount to tacit consent to the distribution of mobile devices that incorporate those chipsets. What could weigh against that conclusion, however, would be a disclaimer of liability in the agreements between the chipmakers and HTC.

• Even if the relevant agreements were to be interpreted to the effect that the patentee did not consent to the incorporation of those chipsets into mobile phones, the patent could still be exhausted if the technical effects of the patent-in-suit are materially achieved by those chipsets, with all other components of those mobile phones not playing a determinative role.

• Now comes the most important part:

  The Karlsruhe Higher Regional Court will have to determine whether the patentee gave its contractual partners (the chipmakers) an assurance that it would not assert the patent-in-suit against them--and such determination will have to focus on practical as opposed to exclusively theoretical considerations. The first and foremost question will be whether in the ordinarily expected course of events the chipmakers must fear to be sued over an infringement of the patent-in-suit.

In other words, the merely hypothetical possibility of the immediate beneficiary of the covenant to sue last being sued is not enough to avoid exhaustion. If it's rather unlikely that the immediate beneficiary of the covenant ever gets sued, then the covenant to sue last will be treated like a covenant not to sue, which in turn is treated like a license.

How can the chipmaker have a reasonable apprehension of being sued in the ordinary course of events? The normal course of events is that if you hold a patent and sue a device maker (and your infringement allegations have merit), you get paid--unless that device maker goes bankrupt along the way.

The short version is: the Federal Court of Justice does not want to let patent holders circumvent exhaustion through a covenant to sue last, but unless there are special circumstances that suggest otherwise, will treat it like a covenant not to sue, which is treated like a license.

Is this a desirable outcome? This post is already long enough without discussing the policy implications, but I do want to mention one: there may be cases in which chipmakers want peace of mind and where it would be in the public interest to allow patentees to give it to them, but in which patent holders may now tell them that after IP Bridge v. HTC it's too risky for them to enter into a covenant to sue last because they may exhaust their patent rights.

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After more than 12 years, HTC and Fortress's IPCom settle standard-essential patent dispute over former Bosch and Hitachi patents

I'm still waiting for an official confirmation of IPCom's recent "eight-figure US$ settlement deal" that IAM mentioned on Twitter, citing to "reports out of China." While I was on the lookout for that, I just spotted the following terse statement on IPCom's website that according to the timestamp went live yesterday afternoon:

"We are pleased to announce that HTC and IPCom have settled their long-running dispute by entering into a license agreement covering all of IPCom's assets."

What an understatement. In the standard-essential patent (SEP) space, any dispute that last more than two years is already "long-running" by my definition--and I doubt anyone watching that space would dispute that a four- or five-year patent spat is "long-running." This one here lasted more than a dozen years--an eternity that has finally come to an end.

Over the years I attended several IPCom v. HTC trials in Germany, mostly in Mannheim, where Deutsche Telekom recently sued for a refund to the tune of 270 million euros. HTC and Nokia were the first two smartphone makers IPCom sued after acquiring a 3G SEP portfolio from Bosch, a company that used to make phones but exited that business even earlier than the likes of Nokia and Ericsson. The fact that HTC and Nokia had to defend against many of the same patents turned those two competitors--otherwise rivals--into brothers-in-arms. In-house and outside counsel of both companies coordinated their defenses like they were one company. Even when Nokia sued HTC over non-SEPs in 2012 (and ultimately got HTC to pay some additional royalties), their friendship survived. They were seen drinking beer on high-speed trains from Mannheim to the Cologne-Dusseldorf region just hours after fighting hard in court.

While I occasionally disagreed with him and disapproved of a couple of remarks he made at the Nokia-HTC settlement party (after inviting me as a surprise keynote speaker), I do wish to give credit to the late Martin Chakraborty, a Hogan Lovells partner and HTC's outside counsel against IPCom and Nokia at the time.

Nokia once claimed that IPCom was seeking a royalty payment of 12 billion euros, which IPCom disputed. The IPCom v. Nokia dispute lost relevance as Nokia's smartphone sales were dwindling, and ultimately Microsoft took over Nokia's handset business. Microsoft told investors that "[i]n November 2014, Microsoft and IPCom entered into a standstill agreement staying all of the pending litigation against Microsoft to permit the parties to pursue settlement discussions," and somehow those talks eventually came to fruition.

Unlike Nokia, HTC even faced contempt proceedings when IPCom was enforcing an injunction. What IPCom demonstrated (and many other litigants don't even seem to know) is that it's far harder to actually enforce a SEP injunction in Germany than to obtain one. In the merits proceeding, you can base your infringement theory on the specification of the standard. At the enforcement stage, you have to prove an actual infringement. HTC had guts.

For IPCom's relatively new management, it's meaningful progress to put some cases behind that it inherited from its predecessors led by Munich-based patent litigator Bernhard "Bernie" Frohwitter. IPCom still has Fortress Investment as its key backer, but it's been noticeable for a couple of years that IPCom's new leadership has taken steps to position the organization--which by the way has its own researchers on staff who keep applying for new patents--as a constructive and solution-oriented licensing firm. They even emphasize corporate social responsibility in such contexts as diversity. The message is like "we're still a non-practicing entity, but don't call us a troll."

IPCom's agreements with HTC and (I'll take IAM's word for it) Apple show that the new IPCom is putting some old problems behind it and focusing on its future in the patent licensing industry. I'll be watching IPCom's activities with interest. There is an interesting parallel: Sisvel, which like IPCom is headquartered in Europe (though it has been around for much longer, and is also a pool administrator) and a "key account customer" of the Mannheim court, also appears to have a new leadership style versus where they were a decade ago. Sisvel announced some interesting settlements last year, most importantly with Xiaomi. Actions speak louder than words. Both IPCom and Sisvel have now demonstrated over the course of several years that their current leaders have nothing to do with exceedingly aggressive--or "trollish" if you will--tactics employed by their predecessors. They still enforce patents if they have to--but with a more constructive attitude.

I believe EU policy-makers have an interest in both Sisvel and IPCom doing well. They are the most prominent European patent licensing firms, and IP licensing is a very high priority when the EU defines its economic policies and strategies. At the same time, the EU also has to take the interests of major SEP implementers into account, of course.

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Ericsson seeks $5 per iPhone for its 5G standard-essential patents, asks federal court to bless that rate, and will probably prevail over Apple unless Samsung pays much less at the upper end

There's a huge new patent licensing dispute in town, and it's hard to see how Apple could realistically win it unless Ericsson made an unlikely mistake in structuring its recent settlement with Samsung. What Ericsson is asking for is FRAND, not only in my opinion but simply in light of a recent decision by the Fifth Circuit in HTC v. Ericsson.

In 2015, it took about a year of litigation between Ericsson and Apple before a new license agreement was signed. That one is going to expire soon--presumably by yearend--but litigation has already commenced. We are not yet talking about any patent infringement assertions (which are barred while a license is in effect), but a declaratory judgment complaint that Ericsson brought against Apple in the Eastern District of Texas on Monday, effectively asking the court to declare that Ericsson's royalty rate of $5 per device is FRAND and that Ericsson's overall conduct is FRAND-compliant (this post continues below the document):

21-10-04 Ericsson v. Apple ... by Florian Mueller

Timing: At first sight, it may seem premature that Ericsson should run to the Marshall, TX courthouse three months prior to the presumed expiration of an existing license agreement. But Apple can't complain. According to Ericsson's new complaint, what happened during the negotiations before the previous agreement expired was that "while Ericsson’s license with Apple was still in force, Apple filed a surprise suit against Ericsson attacking seven Ericsson U.S. patents as not essential and also seeking, in the alternative, a patent-by-patent FRAND adjudication."

Interestingly, Ericsson already reached out to Apple in December 2020 to start discussions of the terms of a renewal. Ericsson knew there was going to be a high risk of a major disagreement. Not only is Apple generally known to play hardball with SEP licensors just like any other suppliers, but Ericsson also took note of Apple's public statements on SEP licensing terms after Ericsson's own 2017 ex ante disclosure of its 5G royalty rates.

U.S. venue: In an international dispute, the race to the courthouse always has something to do with venue choices. Apple dreads Ericsson's choice--the Eastern District of Texas--so much that it doesn't even operate any Apple Store there anymore as any permanent business presence weighs against a motion to transfer a case out of a district. Ericsson, by contrast, has major operations in the Eastern District of Texas and frequently litigates there, recently with a spectacular success against HTC that was upheld by the regional appeals court, the United States Court of Appeals for the Fifth Circuit, which is great for the Swedish wireless innovator and terrible for the smartphone luxury brand from California.

In the venue and jurisdiction part, Ericsson's complaint discusses Apple's "Texas ties" and growing Austin campus. However, Austin is in the Western District of Texas. While Ericsson also argues that Apple sells products to customers in the Eastern District and that it negotiated with Ericsson executives based there, I doubt that Apple would even want to go to the Western District, which has been so good to patent holders in recent years--and where Ericsson's Fifth Circuit victory over HTC would be controlling law, too. If Apple wants to go west, it will want to go much further west, i.e., to the Northern District of California, its home district. But I can't see how Judge Gilstrap would grant such a motion, and the predictable denial would hardly be overturned by the Federal Circuit if Apple brought a mandamus petition.

China: Apple is a major investor in China compared to other foreign companies. In August, the Supreme People's Court (SPC) of the People's Republic of China affirmed a jurisdictional decision in an OPPO v. Sharp case. Apple could try to seek a global royalty determination in China, but other than manufacturing it wouldn't really have a strong argument--and even though some (especially in the EU) misapprehend those Chinese decisions, it's not like the Chinese courts always agree that they should set global licensing terms: their decisions are highly case-specific. Should Apple try anything in China, Ericsson would likely be able to obtain an antisuit injunction in Texas, or at a minimum an anti-antisuit injunction against an actual or potential Chinese antisuit injunction.

UK and Germany: Those two European countries--one of them in the EU, the other not anymore--will become key venues once the existing license agreement has formally expired without a new deal being in place. In those jurisdictions, Ericsson's strategy would predictably be to obtain SEP injunctions unless Apple takes a global portfolio license. In the UK, the court will set terms that Apple will have to accept lest it be enjoined on a UK-wide basis. Apple is losing big-time against Optis, a group of non-practicing entities that also assert former Ericsson patents by the way. A Form of Order hearing will be held in London next Monday after Optis obtained a favorable judgment, and Apple will come under serious pressure in Mr. Justice Meade's courtroom. In Germany, the courts would not engage in rate-setting at the infringement stage. The big question would be whether Apple could avoid a sales ban by means of a § 315 licensing offer (i.e., taking a license but leaving the royalty determination to a subsequent court proceeding if the parties fail to agree). In the meantime, there would already be a decision from Texas on the FRAND compliance of Ericsson's royalty demands.

Alston & Bird again: The lead attorney and first signatory under the new Ericsson v. Apple complaint is Dallas-based Alston & Bird partner Theodore "Ted" Stevenson, III. He helped Ericsson defeat HTC, and that case is the one for Ericsson to build on in the new dispute with Apple. Apple's phones are way more expensive than HTC's, so if HTC owes Ericsson up to $4 per device and for 4G, there's no reason Apple shouldn't pay $5 and for 5G. The parties appear to be so far apart that Apple isn't even prepared to pay what the courts have already found Ericsson can reasonably demand from HTC.

As in most Ericsson patent cases in the U.S., such as the recently-settled dispute with Samsung, the firm of McKool Smith is also involved. Alston & Bird is frequently seen on Nokia's side, but by now it's apparently the go-to firm for both major Northern European wireless SEP holders.

ETSI IPR Policy: Just like in Ericsson's dispute with HTC, the applicable FRAND framework is the ETSI IPR Policy.

Past dispute with Qualcomm hurts Apple in two ways: From early 2017 to the spring of 2019, Apple was embroiled in SEP-related litigation with Qualcomm and supported (already during the investigations preceding litigation) the Federal Trade Commission against the San Diego chipmaker. Ultimately, Apple needed 5G chips--and caved. The FTC kept fighting, but was trounced in the Ninth Circuit, and then didn't even dare or couldn't build a majority (of the commissioners) to file a cert petition with the Supreme Court. While the Ninth Circuit's Qualcomm decision isn't formally binding in the Fifth Circuit and the Eastern District of Texas, it does help Ericsson psychologically. What's more important is that Qualcomm's lead counsel against Apple, Cravath's Evan Chesler, presented in open court (at a time when the parties had actually already signed a settlement, but opening arguments had not been halted) an Apple-internal document according to which the iPhone maker made it a strategic objective to devalue SEPs. Ericsson's new complaint contains six occurrences of the verb "to devalue" and four of the noun "devaluation." In paragraph 44, Ericsson says that "Apple's attacks [meaning public statements directed against Ericsson's 5G royalty rates as well as similar behavior against other major SEP holders] are part of a self-described strategy to devalue standard essential patents" (emphasis added).

Portfolio litigation: Ericsson says that according to a 2019 FRAND policy statement by Apple, Ericsson should have to prove that each and every SEP to be licensed is actually valid and infringed by Apple, which is obviously not doable and simply not the way the courts view it. The following passage makes a compelling case against patent-by-patent country-by-country litigation:

"Apple knows that it would take hundreds of millions, if not billions, of dollars and several human lifetimes to individually adjudicate infringement, essentiality, and validity of the thousands of essential patents owned by Ericsson, then individually value them, in dozens of courts worldwide. By publicly committing to this licensing methodology, Apple intentionally foists the threat of enormous transaction costs on patent owners as a tactic to make them acquiesce to sub-FRAND royalty rates offered by Apple."

Royalty base: Ericsson argues that the price of the end product (in this case, the insanely overpriced iPhone) needs to be considered in a FRAND determination. Apple, however, makes the smallest salable patent-practicing unit (SSPPU) argument, which Ericsson overcame in its dispute with HTC in Texas as well as the Fifth Circuit.

Ericsson-Samsung terms: The overall circumstances suggest to me that Ericsson is going to win this, and the only leverage Apple has is "hold-out." Ericsson needs patent licensing revenues. Apple can try to delay the inevitable. Ericsson will most likely get a favorable decision in the U.S., and it can obtain sales and import bans in multiple jurisdictions, some of which will expect Apple to take a global license on Ericsson's FRAND terms. If there is any risk here to Ericsson, it's purely hypothetical and most likely a non-issue: Ericsson and Samsung settled so quickly this year that I can't rule out Ericsson made major concessions to the Korean consumer electronics giant. However, Ericsson knew that it was anything but unlikely to run into another dispute with Apple, and Samsung won't have had any desire to help Apple. Therefore, I believe the Ericsson-Samsung license deal involves a somewhat lower royalty rate on those Samsung phones that cost a fraction of an iPhone, but that whenever the terms of the Ericsson-Samsung license come into play (comparable licenses, non-discrimination), Ericsson can argue that even Samsung accepted to pay a royalty rate that is consistent with demanding $5 per iPhone from Apple.

Implications for EU policy making: The European Commission's DG GROW is preparing a consultation on potential legislative and/or other policy action regarding SEP enforcement. With Ericsson now having such problems getting Apple to pay a royalty rate that is pretty reasonable, and with everyone out there knowing that Nokia will also have to talk renewal with Apple in the not too distant future, I frankly can't see that the executive branch of the EU government would make any proposal next year that would bring down SEP license fees. There simply wouldn't be any political support for that, much less after the AUKUS deal as a public statement by arguably the most powerful EU commissioner, Thierry Breton, on the need to "rebalance the EU-U.S. relationship" shows.

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Standard-essential patent royalties set to rise after unanimous Fifth Circuit judgment in Ericsson's favor ($2.50 or 1%/$1-4 per 4G device) against HTC

Hurricane Ida's landfall prevented the Fifth Circuit from holding the Continental v. Avanci et al. appellate hearing scheduled for yesterday (Monday, August 30). But the appeals court is still weathering the storm in other ways, and today put out its HTC v. Ericsson opinion (PDF).

The judgment is unanimous, though Circuit Judge Higginson filed a concurrence to make a point that is, ultimately, not outcome-determinative here.

The case originated from the Eastern District of Texas, where HTC alleged a FRAND breach by Ericsson, lost a jury trial, and the district court additionally entered declaratory judgment holding Ericsson in compliance with its obligations under the ETSI FRAND pledge, which is governed by French law. While the appeals court's affirmance of the district court ruling is based on purely legal questions (partly relating to jury instructions), it's worth noting what royalty demands have been blessed on the bottom line:

• Ericsson initially (in 2016) wanted $2.50 per 4G device.

• After HTC brought the complaint in question, "Ericsson proposed a new licensing agreement whereby HTC would pay 1% of each 4G device sold, subject to a $1 floor and a $4 cap."

HTC's response to the original $2.50 rate was a measly $0.10 counterproposal. The reaction to the 1%/$1-4 deal was an amended complaint.

Why such a discrepancy? Primarily it's due to the fact that HTC made a smallest salable patent-practicing unit (SSPPU) argument, claiming that the baseband processor should serve as the royalty base.

Outside of the Northern District of California, SSPPU arguments don't seem to get traction. While I believe no court would ever be inclined to let a WiFi SEP holder collect 1% of the price of an entire airplane with WiFi on board, baseband processors that aren't fully licensed aren't the measure--and if they are fully licensed, than the value of all IP licenses far exceeds that of the raw material.

The district court declined to overinstruct the jury, and its approach has now been affirmed. This is also a post-term achievement for the Antitrust Division of the United States Department of Justice under then-AAG Makan Delrahim. In late 2019, the Trump DOJ had filed an amicus brief formally in support of neither party but practically in Ericsson's favor. Interestingly, Apple's amicus brief in support of automotive supplier Continental's ill-conceived U.S. case against Avanci, Nokia and others--which is pending with the same appeals court--is all about bashing the Trump DOJ.

Let's face it: this victory for Ericsson is of transcendental importance. Whatever HTC will end up paying Ericsson is just a small piece of the puzzle. In the greater scheme of things, this is yet another milestone for cellular SEP holders, some of whom are going to look at Ericsson's win and feel that their rates are too low. And it's going to be harder and harder for car makers to refuse to pay royalties on their products that the U.S. judiciary apparently considers appropriate for phones. Apportionment arguments don't seem to do the trick for implementers--and there are so many license agreements that will have to be renewed in the near future, with SEP holders often demanding substantially higher royalty rates for licenses covering 5G.

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Broadbased support for Samsung's petition for rehearing en banc in Apple injunction case

With an unusually strong dissent, Federal Circuit Chief Judge Sharon Prost practically invited Samsung to request a rehearing en banc (full-court review) of a 2-1 decision that would, unless overturned, pave the way for a permanent injunction for Apple against Samsung over patents covering limited aspects of some of countless smartphone features. Samsung accepted the de facto invitation and petitioned accordingly. On Monday, five amicus curiae briefs in support of Samsung's petition were filed. These amici include:

• the National Black Chamber of Commerce (which warns against the risks of African-American businesses being forced out of markets by patent-wielding incumbents);

• non-governmental organizations Public Knowledge and the Electronic Frontier Foundation (EFF), whose joint filing focuses on the majority opinion's holding that the public interest "nearly always" favors patentees seeking injunctions, which has these NGOs greatly concerned;

• innovation policy researchers Charles M. Davidson and Michael J. Santorelli of the Advanced Communications Law and Policy Institute of New York Law School, whose brief (filed in their individual capacities, not on behalf of their university) expresses profound concern over a potential "deluge of lawsuits seeking injunctive relief" that would stifle innovation;

• the Computer & Communications Industry Association (CCIA), whose members include, among others, Amazon, Intuit, Microsoft, Netflix, Sprint, and Yahoo; and

• a group of companies including Google, Facebook, eBay, ASUSTeK, HTC, Lenovo, Newegg, and Red Hat. (ASUSTeK, HTC and Lenovo compete directly with Samsung.)

Chief Judge Prost must be pleased that her dissent from the majority opinion has support in academia, NGOs, and industry.

Apple, however, has a particular problem with the brief filed by the Google-Facebook group. It has asked the Federal Circuit to reject the brief because the filers allegedly didn't meet and confer with Apple prior to filing and because Google should, in Apple's opinion, be treated as another party to the dispute lest its amicus brief constitute an end-run around page limits. I don't have an opinion on the procedural argument, and it doesn't seem overly important to me whether Google is a legitimate amicus curiae in this case, given that there is no way Apple could prevent all the other members of that group of companies from filing an amicus brief. Also, even if the court formally agreed with Apple, the circuit judges would get to see that brief anyway. By far and way the most important aspect of this brief is that it shows the support Samsung has in industry. That political weight would not be diminished by a potential rejection.

Here's the "Google et al." brief (this post continues below the document):

15-11-02 Google Facebook Et Al. Amicus Curiae Brief ISO en Banc by Florian Mueller

Just like Chief Judge Prost, these companies seek to defend the causal nexus standard the Federal Circuit established in its first three Apple v. Samsung injunction decisions. Part A of the brief explains why there is now an inconsistency that must be settled by means of a rehearing en banc. In the second half of their filing, these companies focus on their concerns as major high-tech companies. They refer to an analogy that came up in a previous Apple v. Samsung injunction-related ruling (and to Justice Kennedy's famous concurrent opinion in eBay v. MercExchange):

"To borrow from this Court's analogy in Apple III, if a laptop computer maker was required to change the design of its battery, cooling fan or screws (and the list goes on and on) every time it was found to infringe one of the thousands of patents covering minor features of its product, and was then forced to litigate whether its design-around complies with the injunction, the laptop maker would face the constant threat of coercive patent litigation."

Instead of injunctions, they propose cross-license agreements such as the one Google and SAP announced last week. They note that Apple has licensed the patents at issue, as the record of this case irrefutably shows.

There is a significant overlap between these amici and the membership of CCIA, but CCIA also has a number of very significant other members, such as the ones I listed further above. Here's CCIA's brief (this post continues below the document):

15-11-02 Apple v. Samsung CCIA Amicus ISO Petition for en Banc by Florian Mueller

I have repeatedly disagreed, but also agreed on more than one occasion, with CCIA. I agree this time around, with one exception:

"There is no dispute that patents are a critical part of protecting innovations."

There are industries in which that is the case, but in this industry, there's a constantly-growing number of companies and individuals who believe the patent system does more harm than good. CCIA notes that its member companies file for patents, and they probably didn't want to appear as an anti-patent group here. So they diplomatically chose to say something about information and communications technology (ICT) patents that is actually rather controversial in this industry. That tactical choice has nothing to do with the strength of CCIA's arguments for a rehearing, of course.

CCIA's brief is very focused. The concern is all about outsized, undue leverage for patent holders over high-tech companies that build highly multifunctional products. It's a concise and convincing brief that has drawn my attention to a brand-new academic paper I wasn't previously aware of:

"The majority's 'new and lower causal nexus appears disconnected from the reality of multicomponent devices. It fails to appreciate that even those most innovative technology products are made up of countless small advances, not a few pioneering ones.' Bernard Chao, Causation and Harm in a Multicomponent World at 9 (U. Denv. Sturm C. of Law Legal Studies Research Paper Series, Working Paper No. 15-56, Oct. 27, 2015), http://ssrn.com/abstract=2681204"

The five amicus briefs nicely complement each other. There are, of course, overlaps (for example, the thrust of the two filings from industry is very similar). But each of these filings raises issues and arguments that increase the likelihood of a rehearing. I'm optimistic about the prospects of this, and we'll likely see even more amicus brief activity if the rehearing is indeed granted.

Apple will likely also get some support for its opposition to Samsung's petition, including, if the not too distant past is any indication, from Ericsson, a company that would not hesitate to leverage a patentee-friendly final decision in Apple v. Samsung against Apple...

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Google defeats Apple in Germany's highest court: slide-to-unlock not a patentable invention

Well over a year ago, Apple and Google announced an armistice under which they withdrew all pending patent infringement lawsuits against one another. I described that one as a second-class settlement from a position of mutual weakness. I still stand by that assessment, with one modification: Google actually got a better deal than Apple. Here's why:

While Google had to give up its original hopes that Motorola's patents could force Apple into a patent cross-license agreement covering the entire Android ecosystem, Google and its partners can also achieve patent peace by getting all the Apple patents invalidated (or narrowed beyond recognition) that have been or could be asserted against Android. Unlike Motorola (prior to being sold to Google for the first time, which later sold it on to Lenovo), Google never wanted to impose a patent tax on Apple: it just wanted its ecosystem to be left alone. Apple hasn't brought any new infringement cases against Android device makers in more than four years, and whatever little is left of Apple v. Samsung is not of concern to Google.

The spring 2014 armistice with Google has a major downside for Apple: it related only to infringement cases, not to challenges to the validity of its patents, a fact that was not clear at the time of the original announcement. Five months ago, the European Patent Office revoked Apple's iconic rubberbanding patent on a Europe-wide basis. The sole remaining party opposing the grant of that patent was Motorola. I have no doubt that Google (not Lenovo) is the driving force behind this continuing effort to shoot down Apple patents, and I guess Google is paying Quinn Emanuel for representing Motorola in cases such as that one.

Today, Google and QE's continuing efforts have succeeded once again (and most probably not for the last time): the Federal Court of Justice, Germany's highest court (besides, theoretically, the Federal Constitutional Court, which has never heard a patent case in its history), today announced (German-language press release) affirmance of the Federal Patent Court's April 2013 decision to invalidate the German part of Apple's European slide-to-unlock patent.

At the time of the previous decision, Samsung was actually leading the effort. I attended that hearing in Munich and Zimmermann & Partner's Dr. Joel Naegerl ("Nägerl" in German), a patent attorney Samsung has been working with in Germany for a long time, was standing in the front row of the part of the courtroom assigned to the attorneys of the complainants (the parties seeking invalidation), and was first to plead. But a year ago, Apple and Samsung agreed to drop all non-U.S. lawsuits against each other, and Samsung withdrew from the invalidation proceedings as a result of that partial settlement. It's easy to imagine why: unlike Google, which has to take care of the Android ecosystem as a whole (a reason for which I believe it should settle the Java copyright dispute with Oracle sooner rather than later), Samsung has no incentive for continuing to challenge patents that won't be used against it anymore.

HTC had also played a key role in the early stages of the case, but already dropped out during the proceedings in the lower court due to a global settlement with Apple.

The Federal Court of Justice found, as I had predicted on Twitter, that the Neonode N1m smartphone, which predates Apple's slide-to-unlock patent, anticipated the slide-to-unlock mechanism per se, so all that Apple could claim as an innovation on top of that one comes down to the visual representation (a slider movement), for which there also is prior art. What is not patent-eligible by German standards (and not under post-Alice U.S. standards either) is the notion of users being able to figure out a certain graphical representation (a slider) more intuitively than, for example, a text (such as the one the Neonode N1m displayed in the same situation) instructing users to swipe.

The number of judges who have now found Apple's slide-to-unlock patent invalid has increased from 10 to 15 (a Federal Court of Justice panel has five members). The only judge in the world who has held so far that Apple deserved a patent on that concept is Judge Lucy Koh of the United States District Court for the Northern District of California. Judge Koh has also made public statements that suggest the opposite of sympathy for parties who challenge bad patents. Her position on what constitutes a patentable invention (as opposed to a great but merely psychological idea without any technologically impressive aspect, which is the way I would describe slide-to-unlock as well as rubberbanding) is an outlier among the 16 judges who have ruled on this "invention" so far.

It will be interesting to see how the Federal Circuit, which also has some exceedingly patentee-friendly judges (Circuit Judge Reyna, for example) but now has a chief judge with a more balanced perspective than her predecessor and appears to have read the Alice writing on the Supreme Court wall, rules on Samsung's appeal of Judge Koh's decision. The Federal Circuit judges frequently talk to and sometimes meet face-to-face with the members of the patent-specialized senate (division) of the Federal Court of Justice of Germany. Maybe they will see eye to eye on this question. Jurisdictional differences exist, but they don't justify upholding a patent on psychology.

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European Patent Office revokes rubberbanding patent: Google and its partners win, Apple appeals

Two weeks ago I highlighted some smartphone patent cases that are still ongoing but have almost been forgotten by the public, including, among others, Google's continuing efforts to have Apple's European rubberbanding (overscroll bounce patent, EP 2126678, revoked. Originally, Samsung and HTC were also pushing for the same result, but due to HTC's worldwide settlement and Samsung's mutual ex-U.S. armistice with Apple, only Google (formally through Motorola Mobility) continued to participate in the proceedings. Still, Samsung and HTC's filings remained on the docket and relevant to the decision, so the time and money they had spent wasn't lost at all.

Last year, the EPO's Opposition Division had already communicated its preliminary position, which was that this patent is entirely invalid in Europe. The two-day hearing was held two weeks ago, with Google's lawyers from Quinn Emanuel Germany appearing on Motorola's behalf. At the end of the hearing, the decision to revoke this patent and to reject all of Apple's amendments (including any that were introduced in the meantime) was announced. This decision has now been made official on the EPO's website:

"The European Patent is revoked because, account being taken of the amendments made by the patent proprietor during opposition proceedings, the patent and the invention to which it relates were found not to meet the requirements of the [European Patent Convention] (Art. 101(3)(b) EPC)."

In mid-2013, the United States Patent and Trademark Office had upheld three claims of that patent, including one Apple asserted against Samsung in the 2012 trial (and the related 2013 retrial).

Apple still hasn't given up on its European rubberbanding patent. This is an iconic user interface feature that Apple clearly wouldn't want its competitors to implement in Europe. Apple's lawyers submitted a notice of appeal to the EPO on March 19, days after the hearing and prior to receiving the written decision that will state the reasons in detail soon. As a result, a Technical Board of Appeal will at some point have to review the Opposition Division's decision.

I've seen various Apple patents go down in Europe, but Apple hasn't been able to defend any European patent Android was actually found to infringe, not counting (of course) patents that were upheld in formal terms only because, after a negative decision that was appealed, settlements put an end to the proceedings. Depending on what kind of procedure we're talking about and in which jurisdiction, a settlement can salvage a patent only because of the withdrawal of a party, regardless of prior negative decisions on the merits.

If one brings a challenge to a European patent within nine months of publication of the grant, the EPO can still look at an opposition and, as in this case, revoke the patent with respect to al European countries in which it was registered. Thereafter, European patents have to be challenged on a country-by-country basis. That's why, for example, Apple's slide-to-unlock patent was held invalid by ten different judges in three different countries.

Losing a patent like slide-to-unlock or rubberbanding in Europe is a disappointment for Apple, but it has no bottom-line impact, at least not in the short term (and probably not even in the mid to long term, though it does make it harder for Apple to position itself as a breakthrough innovator and its competitors (especially those whose devices run on Android) as copycats.

To the extent that U.S. judges (especially at the Federal Circuit, the center of gravity of Apple v. Samsung at this stage) hear about such rulings, bad news for Apple's European patents may also, not as the most important factor but as another piece of the puzzle, dissuade American jurists from buying Apple's innovator v. copycat story. For someone who argues that courts need to protect its groundbreaking innovation, Apple's patent assertions haven't had a whole lot of merit, though this is an industry-wide issue: smartphone patent assertions usually go nowhere. The U.S. is not the only jurisdiction in which Apple can win at all, but it's the only one in which can win anything meaningful. Substantive patent law has not been harmonized between the U.S. and Europe, but cross-jurisdictional differences will likely play less of a role in the future given the impact of the Supreme Court's Alice decision (which has turned out bigger than I would have thought, though I still think some people blow it out of proportion).

Again, none of this should have Apple investors or its loyal fans concerned. Steve Jobs thought patent litigation would help to keep Android at bay, and we all know by now that it won't--still Apple is doing fantastically well and will continue to do so for years to come.

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Industry body says Apple advocates rules that would give patent trolls access to injunctions

Recently the Federal Circuit scheduled the hearing on Apple's appeal of the denial of a permanent injunction against Samsung after last year's trial. The hearing will be held on March 4. From the outside it looks like one of the last steps before this dispute will be history.

Three weeks ago I wrote about Apple's opposition to an amicus curiae brief submitted by Google, SAP, Red Hat, Rackspace, and -- notably -- Samsung competitors LG and HTC. The brief was accepted by the Federal Circuit over Apple's objections. Apple may have opposed the filing just because this was an opportunity to highlight Google's special involvement with the case in an effort to diminish the brief's credibility, but even if one viewed Google (like Apple suggested) as a de facto party to the case, the other filers have quite some credibility.

Cases should be decided on the merits, not on amicus brief campaigns. That said, it says something that Apple has support only from Nokia and Ericsson -- the company with which Apple now has a dispute over potentially much more money than what the remaining parts of the Samsung case are about, especially since the Apple-Ericsson situation is very unbalanced (Apple has much less offer to Ericsson in terms of a patent license, so it won't be able to offset the inbound licensing cost with much of an outbound licensing revenue stream).

Besides the aforementioned group of companies, the Computer & Communications Industry Association (CCIA), whose members are listed here, also submitted a brief. It already did so back in mid-December, but it appeared on the Federal Circuit docket only yesterday. I've also found it (PDF document) in the Briefings & Filings section of CCIA's website.

It focuses on two issues. The first one is about whether a feature-specific injunction should be easier for Apple to obtain. CCIA argues that the scope of the injunction was already considered.

There's a second, shorter part that raises an issue I wish to highlight. CCIA says "the special treatment Apple requests would open the door to patent assertion entities [i.e., patent trolls] to demand injunctions."

CCIA takes issue with the notion that a patent holder shouldn't have to prove a causal nexus between the infringement of a small feature of a multifunctional device and the alleged irreparable harm because it's so easy to work around.

In light of strict page limits, it would be unfair to both Apple and CCIA not to consider an important nuance: while this particular part of Apple's pro-injunction argument could indeed open the floodgates to injunctions obtained by patent trolls (which could also hurt Apple in the future), I understand Apple's position as being about the combination of the availability of workarounds and the patent holder having a "reputation for innovation." The second part would be much harder (though not impossible) for a patent troll to satisfy.

CCIA nevertheless has a point. In order to obtain an injunction against Samsung (over patent claims that are too narrow to give Apple strategic leverage), Apple must try different things to lower the hurdle. Apple wants to have its cake and eat it (get an injunction against Samsung but preserve much of its ability to fend off injunction demands by trolls), and that's always risky. Presumably the perfect outcome from Apple's point of view wouldn't be that the court reverses Judge Koh's injunction denial just based on the availability-of-workarounds basis. Apple almost certainly hopes for the aforementioned combination of that one with the "reputation for innovation" criterion. However, this here could go wrong in two ways:

1. An appellate decision that emphasizes the "small feature" part (or is based entirely on it) would have exactly the effect CCIA warns against, whether or not this would have been Apple's intention. Apple can make its case but it can't write the decision even if it prevails.

2. I've previously criticized the "reputation for innovation" criterion as a very vague and soft one, and I think it runs counter to the traditional logic of the patent system, which is all about technological merits (what contribution was made to the state of the art relative to the prior art?). If this approach was adopted by the court, patent law would depart from its focus on rewarding inventiveness and start to reward PR and marketing. A patent troll (not a small one, obviously) could spend a lot of money promoting its inventions and its research and development efforts to maximize the leverage it gets from its patents. And if it has other licensees, those are arguably harmed by infringement, and by extension, the patent holder is then harmed as well.

Apple is doing so well. It doesn't really need an injunction (over patent claims of limited scope) other than for publicity and pride. In terms of natural allies for Apple when it comes to balanced patent policy, the likes of Google, Samsung and SAP -- companies that also have a strong reputation for innovation -- would clearly be a better fit (because their uncompromised priority is on making real products) than Nokia and Ericsson. It's possible that just the increased cost of licensing patents from Nokia and Ericsson in the future (those also have non-standard-essential patents, so FRAND alone can't solve the entire problem for Apple) will outweigh any positive effects that Apple could get, in the most optimistic scenario, from a successful appeal.

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Competing device makers HTC and LG join Google, SAP in backing Samsung against Apple

Apple, Samsung and Google are three of the most significant members of an industry coalition that is fighting the good fight for balanced rules of procedure for Europe's future Unified Patent Court, particularly with respect to access to injunctive relief. But as the industry coalition stated repeatedly, including at the November 2014 hearing, some of its members are actually embroiled in patent litigation--in which they have sought or are seeking injunctions--with each other. That fact only adds to the credibility of that industry group because it shows that some of its members, such as Apple, are more interested in obtaining sales bans over patents than others, such as Google and Samsung, yet they all agree that the current proposal would make Europe a patent trolls' paradise and hurt all innovative operating companies. Nothing could better demonstrate just how bad those proposed rules are.

The most notable case in which members of the UPC industry coalition stand on opposing sides is Apple's appeal of Judge Lucy Koh's August 2014 denial of a permanent injunction against Samsung over the patents on which Apple had prevailed at the spring 2014 trial. Apple says that a feature-specific injunction should be granted here and claims to have better evidence in place this time around (Apple filed a reply brief this week that reinforces the points made in its opening brief) but Samsung argues that Apple still can't tie patented features to lost sales. Google sides with Samsung on this and has, together with other significant companies (LG, HTC, SAP, Red Hat, Rackspace), asked the Federal Circuit for permission to file an amicus curiae brief.

Apple formally opposes the proposed filing, noting that Google accepted to indemnify Samsung with respect to certain patents. However, no liability was established with respect to those patents, and as a result, they are not at issue in this injunction appeal. Apple also points to various business relationships between Google and some of the other amici curiae, even including some small-scale business partnerships compared to which there's actually a much closer cooperation between Apple and Samsung in certain (component-related) areas. Notably, HTC and LG compete with Samsung, and since HTC has a ten-year license agreement in place with Apple, it has no reason to be concerned about the particular patents at issue here.

I've seen LG enforce some of its patents (such as patents on the Blu-ray standard) rather aggressively.

There have also been some other filings. Industry group CCIA and the National Black Chamber of Commerce filed other briefs in support of Samsung, while Apple's pursuit of an injunction is backed by Ericsson and Nokia, two companies that used to build smartphones but exited that business and increasingly focus on patent licensing (and that are obviously not members of the aforementioned UPC industry coalition). While it's certainly good for Apple to have at least some support from third parties, the fact that no current smartphone maker was prepared to back Apple here shows that Cupertino is somewhat isolated in its industry when it comes to this issue. They all face too many patent assertions all the time and have to think about their interests as a defendant, even if they engage in some enforcement (Microsoft, for example). And there could be a future situation in which Apple itself will fight an injunction bid against its products and someone else will use Apple's own pro-injunction arguments against it.

I'm not an expert in the admissibility of amicus curiae briefs, so I can't predict whether Google itself will be formally allowed to appear as a "friend of the court" here, but there cannot be the slightest doubt about the other filers.

It's an interesting brief that this blog is first to make available to the general public (access is still restricted on the Federal Circuit docket; this post continues below the document):

14-12-24 Google HTC LG Rackspace RedHat SAP Amicus Brief by Florian Mueller

The amicus brief focuses on the bearing of a certain Federal Circuit decision from 2013, Douglas Dynamics, on the present case. In that case, which involved two snowplow manufacturers, then-Chief Judge Randall Rader stressed that if a workaround is available, an infringer should choose the path of legality. At the time I thought this was going to be very helpful to Apple (at that time, in connection with its first California case against Samsung, while the current appeal relates to the second case). But it turned out that it didn't help Apple too much. Smartphones and snowplows are different markets with different characteristics, and there's obviously a much smaller number of features in a snowplow than in a smartphone. While Apple won a remand of the denial of a permanent injunction in that first Samsung case, Judge Koh again (while taking into account the additional guidance from the Federal Circuit) denied an injunction. Last summer Apple dropped its related cross-appeal and, thereby, forever accepted that denial.

The above amicus brief has two parts. Section A explains that Apple still has to establish a causal nexus between the infringements identified (Samsung is appealing those findings, by the way) and the alleged irreparable harm, regardless of the scope of the injunction it is seeking. In other words, the standard isn't lowered just because a proposed injunction wording is very specific to particular features. That makes sense and may be part of the reason why Apple tries to reduce the credibility of that amicus brief, but I'm now going to focus on Section B, which addresses Apple's argument that Douglas Dynamics supports its injunction push now (though it didn't help in the previous case).

The "causal nexus" question never came up in Douglas Dynamics. That's the primary reason for which it didn't help Apple before and may not help now. According to the amicus brief (and I'm obviously not able to verify this), "Douglas's patents were directed to an entire snowplow blade assembly, not a specific feature of that assembly." The brief goes on to discuss another key difference from the Apple-Samsung dispute:

"Second, the core innovation of Douglas's patented snowplow design allows a user to easily remove the assembly, reducing stress on the vehicle's suspension. [...] Douglas promoted this 'easy on, easy off' feature in advertising for its own snowplow assemblies by incorporating the concept into its trademark – Minute Mount – to ensure that snowplow customers associate the patented feature with Douglas. [...] Here, there is no evidence that the patented features are core innovations of Apple’s products or that Apple has advertised them as such. Apple certainly has not incorporated those features into its product brand names."

As for the last part, the iPhone is certainly not sold or advertised as the "slide-to-unlock phone" or the "quick-links phone."

The brief also says that "Douglas never licensed the patents-in-suit and intentionally chose not to, thus insuring that the innovative design would (absent infringement) be exclusively associated with Douglas in the minds of its customers," and contrasts this no-outbound-licensing-ever approach with the fact that "Apple has licensed the patents-in-suit to several competitors, including IBM, Nokia, HTC and Microsoft." I would agree with the amici that "there is simply no evidence that anyone exclusively associates the patented features with Apple," with the exception that Apple's particular implementation of slide-to-unlock, with the slider bar, is certainly a signature feature, but Apple didn't even accuse the more recent products at issue in this case (and those are already a couple years old) of infringement of its slide-to-unlock patent. In the prior art context it has been stated over and over that the iPhone was not the first phone to come with a slide-to-unlock mechanism, which is why the related patent family is so weak. With respect to "quick links," that's a feature that consumers typically can't distinguish from other links, such as the ones found on a webpage like this. And autocomplete is also something that you find in all products from all sorts of vendors.

A key concern of the amici is that the way Apple would like Douglas Dynamics to be applied to cases like this one "would unfairly create a lower standard for proving causal nexus for companies with a reputation for innovation." Apple argues that Douglas Dynamics made the patent holder's reputation as an innovator a key factor. The amici concede that there is direct competition between Apple and Samsung, and that Apple has a reputation as an innovator, but say that evidence is "scant, at best," with respect to claims that Samsung has a less prestigious reputation, that Apple makes efforts to maintain exclusive control over its patented features, and that an injunction was necessary to demonstrate to consumers that Apple does protect its intellectual property rights.

Against this background, the amicus brief says:

"So the proposed 'Douglas Dynamics test,' as Apple has framed it, is this: if a patentee has a reputation for innovation and its patent is infringed by a competitor, then the patentee's reputation will necessarily be harmed by that infringement – no matter how trivial the patented feature – because consumers might believe the patentee did not enforce its intellectual property rights. No further proof of causal nexus is needed. The logical leap is astounding."

The appellate hearing will take place in a matter of months, and I'll listen to the official recording as soon as it becomes available (usually on the day of the hearing). I understand Apple's desire for a sales ban and I said before that, while Samsung doesn't need to infringe the related patents (and the liability findings are subject to an appeal, with the autocomplete patent also being under reexamination pressure), an injunction would make Apple look and feel better. However, it wouldn't make sense to lower the standard for access to injunctive relief if an injunction bid comes from a company with a reputation for innovation. In Apple's case, that reputation is based on a definition of innovation that is inconsistent with the one applied in patent law. In patent law, it's about who's first to come up with something, not who's first to convince millions of consumers to buy and use technologies that, for the most part, others created before Apple.

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Google and Android OEMs apparently close to settlement with Rockstar over ex-Nortel patents

About a year after the Rockstar Consortium's Halloween 2013 lawsuits against Google and a host of Android device makers, and only days after a $188 million settlement between Rockstar and Cisco became known, the most likely outcome is now that Rockstar's pending cases against Google and various Android OEMs will be settled at a relatively early procedural stage.

Four days ago, Rockstar filed an unopposed motion in its Google case (over search engine patents, which is separate from the Android cases) for a 45-day stay, which was subsequently granted. The motion said the following about the current state of affairs:

"[O]n November 12, 2014 a binding Term Sheet was executed that settles, in principle, all matters in controversy between the parties. [...] [T]he Term Sheet is [being] reduced to a definitive agreement. [The 45-day stay] is necessary due to the complexity of the transaction and the number of additional parties whose claims are concurrently being resolved."

There are no additional parties to the case over search engine patents besides Rockstar, its NetStar Technologies subsidiary, and Google as the sole defendant. However, there are many parties to the Android cases (devices makers like Samsung, LG, HTC, and ZTE), making a comprehensive settlement involving not only search engine but also wireless patents the only plausible interpretation of that passage.

Absent a settlement, all of the key issues in the Android context would be resolved in the Northern District of California, the venue preferred by Google and its partners. In the declaratory judgment action in California, a report was filed in early November, saying that the parties engaged in court-ordered mediation but reached no settlement. However, it is possible that the mediation meeting nevertheless had a positive effect. It probably also helped the parties to know in which court the infringement and validity determinations would be made.

It would be out of character for Google to make a huge payment at an early stage of a patent litigation (though there's always the possibility of something happening for the first time in history). It's also unlikely that pretrial discovery has given the parties definitive clarity about the likely outcome. So I can't imagine that the impending settlement would be a win across the board for Rockstar. The two most likely scenarios are either a win-win (Google and its partners can put this thing behind them for an amount that's worth it while Rockstar can produce some revenues that help the acquirers of Nortel's patents offset some of their costs) or a set of terms under which Rockstar lets Google and its partners off the hook at a rather low cost. Should the latter be the case, then it would most likely be attributable to dwindling support for Rockstar's lawsuits among its owners.

While no single shareholder (not even Apple, which contributed most of the funding) will be singlehandedly in the position to tell Rockstar's management what to do, it's possible that a couple of shareholders have demanded that those cases be settled. Protracted and potentially acrimonious litigation could have resulted in negative publicity for Rockstar's owners (a key difference between Rockstar and "patent trolls" who have no affiliation at all with any operating company).

Also, Rockstar's management and/or shareholders may have found Google's proposed terms more acceptable than initially. After all, smartphone patent lawsuits typically don't give plaintiffs tremendous leverage.

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