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The next phase of the Microsoft v. Motorola litigation in Seattle will begin on August 26th. It will be a jury trial, as Motorola requested. I hope some of you are nearby and can attend. This will be the part about Microsoft's claims of breach of contract based on its assertion that Motorola violated a RAND contract by its opening bid being allegedly too high.
To describe it is to express the ridiculousness of what has been happening in Seattle. Why do I say that? I'll show you.
There are now 68 public comments listed on the FTC's website on the topic of patent trolls. Patent Progress's David Balko's article, The End-Users Strike Back, notes that a surprising number are from end users, defined as "retailers, financial services, grocery stores, advertising, hotel industries, and even oil companies [who] are coming out in droves to fight abusive patent troll tactics":Patent trolls have started to target end-users, especially small companies, because they typically lack the expertise, experience and ability to fight questionable claims. Litigation costs can quickly mount up to $250,000 to $500,000, and reach millions if the case goes all the way through trial (not to mention appeals). End-users also have to deal with disruptions to their business from discovery requests and managing the litigation. Often companies are forced to divulge secret financial and technical information as well as divert key personnel from their work to participate in depositions and give testimony. Patent trolls, on the other hand, have few costs in pursuing a suit because they do not operate in any market. The lawsuit has no disruptive effect on the patent troll's business because it is the patent troll's business. You may enjoy going through them, but I thought you might like to see one of the more thoughtful of the public comments, the one from Ken Wasch [PDF], President of the Software & Information Industry Association, or SIIA, a trade association for the software industry with 700 plus members, because it provides details on how the patent trolls attack and what the results have been. I don't see members listed on the site, but the Software Board lists a number of companies, including Red Hat and IBM, and a number of smaller companies. And the comment states that trolls are hindering innovation, being "masters at abusing and manipulating the patent system." The footnotes alone are worth noting, but the really interesting part is how the comment explains how trolls do what they do. I learned something I've long wondered about, why trolls hide who they are in litigation.
The beat goes on in the Apple v. Motorola appeal of Judge Richard Posner's ruling dismissing both parties' claims with prejudice, saying neither was entitled to damages or an injunction. Both are appealing, but for different reasons. Motorola has now filed its redacted reply brief [PDF] in response to Apple's response and reply brief [PDF]. And as soon as Judge James Robart issued his Microsoft-friendly ruling in Microsoft v. Motorola in the Seattle litigation, Apple sent a letter to this appeals court, bringing it to the court's attention, because it supports Apple's position and calls Motorola's patents a trivial contribution to the standard.
Motorola defends the value of its patents and then tells the Federal Circuit that RAND patent holders have to be able to seek injunctions against "intransigent" licensees like Apple. Otherwise, they'll take advantage, delaying by litigation any reckoning for years while benefiting from the technology without paying for it.
What exactly should happen to a company that refuses to pay and won't accept an offered rate or a court-set rate? The RAND patent holder *still* can't do a thing? No injunction? Nothing? Apple began its infringement, Motorola points out, in 2007. It's now 2013, and it still hasn't paid a dime. "Motorola should have the opportunity to seek an injunction to stop Apple's six years of ill-gotten gains from stretching into a decade or more," Motorola says.
We made it. A decade of Groklaw as of today. Who'd a thunk it?
When I started, I thought I'd do a little fiddling around for a couple of months to learn how to blog. But then all you guys showed up and taught me some important things that I didn't know, and vice versa I hope, and here we are, on our 10th anniversary, still going strong, together on a very different path than I originally imagined. The important moment for me was when I realized the potential we had as a group and decided to try to surf this incredible wave all of you created by contributing your skills and time. I saw we could work as a group, explain technology to the legal world so lawyers and judges could make better decisions, and explain the legal process to techies, so they could avoid troubles and also could be enabled to work effectively to defend Free and Open Source Software from cynical "Intellectual Property" attacks from the proprietary world.
And it worked! That's the amazing part. It actually worked. So far, so good.
If I take three things away from our experience, it's this: 1.) Education is never a waste,
Groklaw was attacked with venom, of course. But here we are, ten years later, still standing.
I am sure you saw that somebody in Germany, a company called nachtausgabe.de, has sneaked through a trademarking of the word HACKATHON in Germany. There was no opposition, because nobody knew about it. We know now, however, so what can anyone do about it? It turns out, plenty.
It's a word that OpenBSD and Sun each came up with independently at the same time back in the '90s, for heavens sake, and it surely can't belong to any one company now that it's in the dictionary and everyone has freely used it for years now.
Anyway, as soon as I read about it, I wrote to the German equivalent of the USPTO, DPMA, the German Patent and Trademark Office, and I've learned some things that can still be done. I'll share them with you, so the community knows how to go forward if it proves necessary.
OMG. CLS Bank v. Alice Corp. has been decided [PDF] by the the Federal Circuit en banc. And Patently O says the court "finds many software patents ineligible"!As described more fully below, we would affirm the district court's judgment in its entirety and hold that the method, computer-readable medium, and corresponding system claims before us recite patent-ineligible subject matter under 35 U.S.C. § 101.1
I knew you'd want to know *that* immediately. We can read and analyze it later in more detail, so stop back by. After I read it again, I'll be sure to post it and we can discuss.
I remember the first time we wrote on Groklaw that software and patents need to get a divorce. Remember? So long ago, and how everybody laughed at us. I remember that too. I am thinking about Apple and Microsoft and all the software patent bullies. Well, let's not get ahead of ourselves. I'll read it more carefully now.
Blackberry Tells the Federal Circuit Judge Posner Got It Wrong Re No Injunctions for FRAND Patents in Apple v. Motorola ~pj
Blackberry's amicus brief [PDF] is now made public in the Apple v. Motorola appeal of Judge Richard Posner's order which seemed to say that if you own FRAND patents, you have no right to seek an injunction under any circumstances.
But that is not how folks understood their rights back when they volunteered their patents for use in standards; it's a change in the rules midstream. And Blackberry tells the Federal Circuit exactly that. This is a change, and it isn't fair, or in the public interest. SEP owners might behave badly, but so can prospective licensees. Here's how attorney Matt Rizzolo at the Essential Patent Blog sums up the Blackberry argument:Just as it has argued in prior submissions to agencies such as the Federal Trade Commission and the U.S. International Trade Commission, BlackBerry asserts here that a categorical rule against injunctions for FRAND-encumbered standard-essential patents is wrong - both as a matter of policy and as a matter of violating Supreme Court precedent. BlackBerry alleges that industry participants have "never understood FRAND to absolutely preclude a patent holder from seeking injunctions." The misunderstanding by one and all, if that is what it is, stems from accepting Apple's argument that a FRAND agreement is a contract, as Motorola's brief points out, but if it's a contract, then contract law should apply. Motorola never waived its right to injunctions, and since that is a right under law, it would have to have specifically waived its rights to lose them. Not even judges can just waive their hands and remove legal rights. Why, indeed, would they want to?
Google, Red Hat, HTC, SAP America, and Rackspace have asked leave of the Federal Circuit Court of Appeals to file an amicus brief [PDF] in the Apple v. Samsung appeal. That's on the first case., the one Samsung lost but has been whittling down a bit in post-trial motions. Here's the issue they'd like to address: Amici are all innovative technology companies that develop and provide a variety of products and services that, like the mobile devices at issue in this appeal, incorporate a wide array of features. As such, an issue presented in this appeal - whether a court may enjoin the sale of innovative and technologically complex products based on the incorporation of trivial patented features without evidence that the accused features drive sales of the products - is a matter of great concern to amici. Apple opposes [PDF]:The lead party on the brief, Google, Inc., admittedly has a direct interest in the outcome of this appeal. As the motion explains (ECF No. 55 at 4; ECF No. 60 at 4), Google is the developer of the Android operating system running on the Samsung smartphones that Apple seeks to enjoin in this case. That interest conflicts with the traditional role of an amicus as "an impartial friend of the court-not an adversary party in interest in the litigation." United States v. Michigan, 940 F.2d 143, 165 (6th Cir. 1991) (emphasis in original). Even if they win, they still lose, though, because there are several others seeking to file the same material, and they are not by any stretch of imagination parties in interest. Except for HTC, none of the rest of the proposed filers is even in the mobile phone marketplace.
SCO, of course, is asking [PDF] the judge in U.S. District Court in Utah to reconsider his order denying SCO's request to reopen its case against IBM.
You knew they would: SCO submits that reconsideration is appropriate because the Bankruptcy Court overseeing SCO's bankruptcy proceedings lifted the stay of IBM's counterclaims in February 2012 and IBM agreed to the reopening of the case should that stay be lifted. The Bankruptcy Court order lifting the stay was previously submitted to the Court with SCO's Request to Submit for Decision, on June 14, 2012. (Exs. A and B.) Accordingly, SCO respectfully asks the Court to reconsider its decision and grant the Motion to Reopen the Case forthwith. They are right about the Bankruptcy Court lifting the stay. So unless the judge is much more clever than I am, which is likely actually, I suspect he'll have to grant the motion to reopen, and then we'll see IBM make its moves. But of course, SCO wants more.
Our own Justin Ellis attended today's hearing at the 10th Circuit Court of Appeals on Novell's appeal in Novell v. Microsoft. This is the antitrust litigation Novell brought over WordPerfect. He has a report for us. He begins with his general impressions, and then provides his notes on the arguments.
To help you follow along, here are some resources:
His general impression is that Microsoft will prevail, as the judges seemed more positive toward its arguments. But keep in mind that you can't always tell what judges are thinking from their questions.
Matt Rizzolo has an interesting article, "Which appeals court has appellate jurisdiction over the Microsoft-Motorola RAND case?":The Western District of Washington sits within the 9th Circuit Court of Appeals (which, as noted below, has already heard an interlocutory appeal in this case). But as you may know, in order to preserve uniformity in patent law, the U.S. Court of Appeals for Federal Circuit in Washington, DC is the court designated by Congress as the appeals court with exclusive jurisdiction for nearly all patent cases. The Microsoft-Motorola case (at least the part which has garnered the most attention) involves a breach of contract issue relating to patents, standard-setting, and patent licensing issues. So, which is it - the 9th Circuit or the Fed Circuit?
Brace yourselves - this will take a couple thousand words. It's worth it.
Newegg's Chief Legal Officer Lee C. Cheng tells the FTC and DOJ in its public comment [PDF] on Patent Assertion Entities that patent troll is a better phrase than politely calling them PAEs, because it describes exactly what they do:While the FTC's and DOJ's investigation refers to this class of NPEs as "patent assertion entities," I believe that the term "patent troll" is more appropriate. A "troll," as in the under-a-bridge fairy tale figure that blocks one's way across a bridge without some payment (or worse, a fight), is the perfect term for this class of NPEs.
Bridge trolls have one thing to offer-a right of way. The trolls have the ability to stop passers by unless they fight their way across or pay the fee demanded by the troll. It matters not to the troll why one requires passage, nor does the troll care that one's passage causes no actual harm to the troll or the bridge. All that matters to the troll is that this is their bridge and you should pay to cross it or prepare for a fight that could cost you dearly. So it is with patent trolls. A patent is essentially no more than a right of way. As a mere patent owner, a patent troll has nothing to offer or license except the right not to be sued under the patent. Newegg describes what it and other retailers are going through, being sued for using internet commerce software they merely license from other companies, like Microsoft, Oracle, and Citrix. Rather than sue those companies, trolls go after users of their software, like Newegg, claiming that some minor detail of the software is the reason for Newegg's success and seeking damages, even though the troll isn't in business and isn't hurt at all by Newegg using the software. This, Newegg concludes, promotes opportunism rather than innovation. And the impact on Newegg of the constant flood of lawsuits is that it can't create new jobs, despite its success because patent trolls are skimming of the top of retailers' already "razor-thin profit margins".
I've already highlighted a couple of public comments from those filed with the FTC by companies being harassed by trolls, describing just how destructive they think they are, like Barnes & Noble's and Google/Red Hat's. Now let's take a look at what the trolls have to say in their defense.
Wait. It seems their feelings get hurt if you call them trolls. IPNav tells the FTC it's "pejorative". Barnes & Noble in its comments uses the word troll throughout, and Newegg in its comments [PDF] said the word is a perfect fit, absolutely descriptive of how they act (see next article). The FTC calls them PAEs. I'll stick with Barnes & Noble and Newegg on this one, if you don't mind.
We'll be reading the comments from IPNav [PDF], which claims to be a "white hat" troll, as well as a snip from MOSAID [PDF], which also claims to be one of the good guys. They feel they are misunderstood. It is in a deal with Nokia and Microsoft to go after people with their sorta donated patents, so you might wonder what Microsoft has to say. In a nutshell, it says [PDF] it wouldn't want the PAE business model shut down. *That's* not the problem. Noooo.
Judge Lucy Koh has reached a decision [PDF] on going forward on the retrial on damages in Apple v. Samsung. Trial is set now for November 12th, on damages only, same Daubert rulings, motions in limine, discovery disputes, and evidentiary objections ruled on the same as the first trial, meaning if she made mistakes in the first trial, they'll be repeated in the retrial. "The parties may not relitigate these issues," she writes. So it's all for the appeal court to figure out. She isn't interested in reviewing all that. So if the appeals court orders a third trial, that's the way it will have to be. She wants to keep the damages retrial short and sweet and limited to just one issue, and then send it on its way to appeal, so no new theories and no new fact discovery. There is a schedule for expert discovery. The jury will be 8 people, with the parties' given three peremptory challenges each. Apple asked for the very same jury instructions, but she says they will get together on October 17th to discuss "how to present infringement and validity findings" to the new jury. Other than that, she is silent on that point.
There is one proviso. If the USPTO does not reopen the reexaminations on the two Apple patents that so far it has found invalid, then Samsung can submit a new motion asking for a stay, but that's only meaningful if the USPTO acts faster than the trial. If not, the damages issues will include the currently invalided patents. No, I can't explain the logic. I'm like Alice in WonderLand watching this.
It's mostly tilting Apple's way at the moment, with a Hail Mary pass possible for Samsung, if certain milestones at the USPTO happen quickly enough. As I've told you many times, US patent law favors patent holders, not defendants. That's one reason trolls can do what they do, bully victims into paying up rather than risking the uncertain outcomes of expensive trials that can illogically go against you even when the trial centers on stupid patents that shouldn't have issued in the first place, because once issued there is a presumption the patent is valid. Even if you win at trial and the patent is invalidated or the jury decides you didn't infringe, nobody pays you back all the millions you've spent defending yourself. Your US patent law at work. How do you like it?
I've found some materials that I think will help us to put the order [PDF] from Judge James Robart in context, the order setting a RAND rate for Microsoft to pay Motorola. From the materials, particularly this report [PDF] from a conference on patent pools and standards bodies held in Brussels in April, 2012, I think you will see that the judge has used the wrong ruler, namely patent pools, to set a rate that is not fair to Motorola for its standards patents. And as you will see, that is the very danger that the conference highlighted, that patent pools can impede innovation, by lowering the price for newcomers to a field who wish to merely implement the standard, like Microsoft, by letting them unfairly underpay those who did the research to develop the standard, as in Motorola.
I'm getting the impression that the judge is just guessing at a rate in places, and from the wrong starting point too, and if you look at the footnotes, you'll see what I mean. Whenever he has insufficient evidence, instead of saying, "Well, I guess I can't figure that out on this record," he says, "I have insufficient evidence, so I'll just set the lowest rate." Here's just one example, footnote 24: 24 Motorola contends that Microsoft products other than Windows and the Xbox use the H.264 Standard. Motorola lists at least the Windows Phone 7 and 7.5, Windows Embedded, Silverlight, the Zune, Lync, and Skype, as Microsoft products that use the H.264 Standard. (Motorola Pr. FC ¶ 535.) Motorola, however, did not provide sufficient evidence for the court to ascertain the functionality ofthese products, making it impossible for the court to determine the importance of Motorola's H.264 SEPs to these products. Indeed, the little trial evidence regarding functionality of these additional products demonstrates that Motorola's SEPs would have little value to them. (See 11/14/12 Tr. at 150 (Orchard Testimony).) Without such evidence, the court is left to conclude that the low bound of RAND is the appropriate royalty rate for all Microsoft products -- Windows, the Xbox, and all others. But Microsoft is the one asking that the court set a RAND rate, not Motorola, so it has the burden of proving what a RAND rate should be on the other products. So presenting sufficient evidence to support a decision is not, as I understand it, Motorola's burden. So why didn't the judge say, I can't set the rate on these others products because *Microsoft* didn't provide enough evidence? Or, if he insisted on setting a royalty, set it at the highest rate, or even at an average? That's where the pro-Microsoft bias shows through, to me. That's only one place where I see an appeal issue that favors Motorola, if it chooses to appeal.
I'm most of the way doing a text version for you of the order itself, but it's 207 pages, and I'm very interested in you guys quickly taking a look at the way the judge writes about the tech and also his math in figuring out the royalty. You'll find that mostly in the footnotes, which are done. I'll keep working on the grunt work of cleaning up the text version, which is still OCR-messy, while you do that part. You have the PDF, and the text is understandable at least, while I work to perfect it. So, let's each get to work.
Update 2: How great is this? Matt Rizzolo and David Long at The Essential Patent Blog have done an annotated version of the order [PDF].
I did tell you not to be surprised if the judge in Microsoft's home court in Seattle favored Microsoft in setting a RAND rate for a couple of Motorola standard essential patents in Microsoft v. Motorola. And in fact, he more or less did, in a Findings of Fact and Conclusions of Law [PDF, 207 pages], although he ordered more than Microsoft offered or thought fair. But interestingly, as Matt Rizzolo points out on The Essential Patent Blog, he used Motorola's methodology to come up with a figure, not Microsoft's: One interesting thing about the findings is that while the ultimate RAND royalty appears to favor Microsoft, Judge Robart seems to have sided with Motorola as to the right approach to determine RAND royalties - simulating a hypothetical, bilateral negotiation between the parties (whereas Microsoft had suggested determining RAND on the basis of an ex ante, multilateral negotiation at the time of the standard's adoption). I feel confident that this will be appealed by Motorola, because the judge in effect sets the "rule" that you can be ordered to accept pool rates in pools you haven't joined instead of following the normal negotiation structure of the standard body you did agree to put your standard essential patents in. And that just can't be right. Who'd donate patents to standards bodies if they know it has no bearing on the royalties they can expect in return?
SCO's motion to reopen its case against IBM has just been denied by the US District Court Judge David Nuffer in Utah. And the denial presents SCO with a Catch 22. It can go forward only when the bankruptcy stay is lifted, meaning when *both* parties can present their claims, not just SCO, with IBM sitting with its arms tied behind its back on a chair with duct tape over its mouth, which was, I gather, SCO's dream on how to go forward: The court has reviewed the parties' submissions and finds that SCO's claims and IBM's counterclaims are inextricably intertwined. Thus, proceeding in the piecemeal manner suggested by SCO would be an inefficient use of judicial and party resources, and potentially could result in inconsistent rulings. Accordingly, the court declines to reopen the case at this time. When the bankruptcy stay is lifted, either party may file a motion to reopen the case. Until then, the case shall remain administratively closed. That's a bonk on the head for SCO, for sure, by a judge who demonstrates the simple truth that judges tend to be brainiacs, and they know it's a duck when they see one paddling along calling out "quack, quack" even if it holds up a sign saying, "I am a Swan." Utah, or so I've read, is the scam capitol of the US. So judges there not only have brains, they probably get a lot of experience as well, one assumes. Judge Nuffer also ruled that he doesn't think oral argument would be needed on this, so SCO's request for a hearing is also denied. I guess you could call it a no-brainer. I mean, fair is fair. Isn't that what courts are supposed to be for? But dealing with SCOfolk does take brains and some careful planning, because they are tireless and nothing dissuades them from trying again any which way, and you see that careful thought went into this order. Also because dealing with SCO is like picking up a scorpion. You do want to give it some advance thought before you try it.
Surely SCO's "We Own Linux" scam must be in the top ten scams in history, not just in Utah.
What? You thought the law was dry and boring? Ha!
The public comments sent to the FTC and DOJ on patent trolls are fascinating. I'd like to show you one outstanding submission, by Barnes & Noble [PDF], who has been sued by trolls, or politely Patent Assertion Entities, or PAEs, over 25 times in the last five years (and received an additional 20+ claims that didn't result in litigation) which meant it has spent tens of millions defending against the avalanche in those five years. They have yet to lose, so they ask what is the point of a company having to endure constant claims that are without merit? Nobody pays them back in full to make them whole, even when they were totally innocent.
Its submission begins: "The patent system is broken," having "lost its true north", adding that the AIA did not fix the troll problem. And so it suggests five common-sense solutions to fix the problems. One suggestion is that trolls should not be allowed to file with the ITC at all, because that agency is about protecting trade, and trolls are not in business. And it points out that the Constitution requires a change. Yes. The Constitution: The Patent and Copyright Clause grants Congress the power "[t]o...promote the Progress of Science and useful Arts," not science fiction and litigious arts. (Article 1, Section 8, Clause 8 (emphasis added)). But the current system allows trolls to pursue fantastic allegations-claims that would be laughed out of the room in actual scientific or technical circles-in endless litigation that taxes and taxes true innovators while making no meaningful contribution to society. If you enjoyed Barnes & Noble's revelations in court and to the ITC about what it called Microsoft's anticompetitive patent scheme against Android, you'll enjoy reading this new comment on trolls. They don't sugar coat. One of the claims it had to deal with was for using HTML. Wait. I'll let Barnes & Noble tell it: Even the most plainly baseless lawsuits are expensive and can take years to defeat. In at least four cases, Barnes & Noble has faced litigation by patentees asserting the same theories on which they previously lost. In one case, for example, Barnes & Noble is alleged to infringe patents because BN.com uses the HTML language and returns search results other than exact matches. The patentee asserted these allegations against Barnes & Noble despite having tried and lost a case against other ecommerce retailers based on the same functional allegations levied against their websites....Barnes & Noble and other technology companies see countless lawsuits in which the asserted patents purport to cover products and technologies common to the entire industry. We face repeated allegations that anyone using Wi-Fi, anyone using 3G, anyone using MP3, anyone with an e-commerce website, anyone using Ethernet, and, recently, anyone using InfiniBand technology, to name a few, is infringing and must pay a hefty price to license purportedly essential patents. The allegations sweep far beyond specific innovations to which a patent might legitimately lay claim. I guess I shouldn't be surprised that lawyers for a book company know how to write. Lawyers can be excellent lawyers without that skill, but when they've got that ability too, what a pleasure it is.
Motorola has now filed its opposition [PDF] to Microsoft's "motion to confirm bench trial of breach of contract issues", and is asking the judge in the Microsoft v. Motorola trial in Microsoft's backyard courtroom in Seattle for a jury trial instead. Can you blame them, considering the history of the case so far, if they think they will have a better chance with a jury, any jury, than with this judge? I mean, Motorola doesn't believe the judge has the authority to decide the litigation in the first place. And that's likely why Microsoft is now insisting that there is supposed to be a bench trial. It claims Motorola waived a jury trial. I'll show you some exhibits that indicate otherwise.
Motorola's best option is an appeal down the road, from all I've seen. I'd call this a Teacher's Pet trial. And you know how it goes when you try to tell the teacher that its pet kicked you in the lunch room.
And you'll see in the docket that the judge, the Hon. James Robart, has decided the issue about how much Motorola's RAND rate should be, but we don't get to read it until the parties tell him if they want redactions. But personally, what are the odds he'll do anything but bonk Motorola on the head again? Still, if you noticed in the Apple v. Samsung litigation, post-trial action can be very effective, even when the trial itself is unfair and the result reflects mistakes or even favoritism, especially when Quinn Emanuel is representing you, because they never give up. It's not over 'til it's over. All of it.
The judge in the first Apple v. Samsung patent case in California, the Hon. Lucy Koh, asked the parties to file a joint case management statement, just in case she decides to go forward with an immediate second jury on the issue of damages on the 14 products where the first jury got the math wrong. And they have now done so [PDF]. There will be a hearing on all this on April 29. Of course, they disagree. Because they don't agree on how to go forward, they each set out their positions, once again. The short version is that Apple wants to hurry up and have the trial immediately and Samsung wants to hear from the appeals court before the new damages trial goes forward, so as to ensure the same mistakes aren't repeated.
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