Larry Page - Lenovo to acquire Motorola Mobility - A Comment

Late January 29, in Lenovo to acquire Motorola Mobility, CEO Larry Page announced that Google had just signed an agreement to sell Motorola Mobility to Lenovo for $2.91 billion.

Mr. Page explains "we acquired Motorola in 2012 to help supercharge the Android ecosystem by creating a stronger patent portfolio for Google and great smartphones for users." He claims "both the Moto G and the Moto X are doing really well, and I’m very excited about the smartphone lineup for 2014. And on the intellectual property side, Motorola’s patents have helped create a level playing field, which is good news for all Android’s users and partners." Mr. Page concludes "Google will retain the vast majority of Motorola’s patents, which we will continue to use to defend the entire Android ecosystem."

Google is smart to sell Motorola to Lenovo and keep the patents, because it may generate another strong Android handset maker, it will allow Google to focus solely on improving Android software, and it will strengthen its own patent portfolio. The Motorola patents may prove useful in the future, but Motorola Mobility has not been winning many of its patent infringement actions in recent years. Motorola's patents have not so far created a level playing field. Beside the standard problem of getting through a court with finding of patent infringement, some of the widely used Motorola patents are standard essential patents (SEPs) subject to fair reasonable and non-discriminatory terms (FRAND). Thus, winning only results in relatively modest damages.

In selling the operating business and keeping the patents, Google has become a non-practicing entity (NPE) on a huge scale. Congress has let the patent litigation abuse concerns fuel bills that may  adversely impact all NPEs. For example, see the bills including fee shifting if a patent owner loses. Hopefully, Google will help Congress to recognize this NPE distinction is not based on the law, nor actually anything and its lobbyists will focus patent reform efforts to more precisely target bad actors rather than all NPEs engaging in patent licensing and enforcement.

Copyright © 2014 Robert Moll. All rights reserved.

Motorola Rushes to the USPTO With Sketchy Drawings - New Matter under 35 USC 132?

In Motorola Rushes Patent Filing for Ugliest Smartwatch, Patently Apple explains "Motorola under Google has to ensure they'll stay on top of new trends this time around" and so rushed a smartwatch application to the USPTO. Patently Apple says we will take the patent filing seriously if it was conceived by their on-site kindergarten class. After I chuckled a bit, I realized there is point to to make about this all too common practice of filing US patent applications with informal drawings.

Many patent attorneys file drawings just like those shown in the Motorola patent application and justify it by saying we wanted to lock in the earliest possible filing date and can always file formal drawings when the USPTO objects to the drawings. However, this approach ignores that if a court holds the amendment to the drawings introduced new matter, any patent claim depending on that drawing is open to a new matter challenge. Will the patent claim be invalidated? It will depend on the scope and nature of the amendments, but in amending the drawings, an applicant cannot introduce subject matter beyond that disclosed in the original application. Further, whatever you save by filing the application with informal drawings will be lost when formal drawings are required. More important, the formal drawing that looks great compared to the informal drawing may have set up an invalidity defense to any patent claim requiring the drawing for support.

Copyright © 2013 Robert Moll. All rights reserved.

Microsoft v. Motorola - Judge Robart's FRAND Rate Setting Decision & Commentators

Last week Judge Robart of the US District Court for the Western District of Washington released Findings of Facts and Conclusions of Law setting the FRAND rate for Microsoft's infringement of two Motorola Mobility patents. The decision highlights the court's authority in setting FRAND royalty rates.

FOSS Patents and Groklaw have extensively commented on Judge Robart's 207-page findings: Mr. Mueller of FOSS Patents chortles Google lost: A closer look at the 207-page, landmark FRAND rate-setting decision in Microsoft v. Motorola. I don't share his joy, but agree Microsoft appears to have won given Motorola initially sought $4 billion and was awarded less than $1.8 million per year.

In a First, Seattle Judge Sets RAND Rate in MS v. Motorola, Groklaw denies the loss arguing that Judge Robart is in Microsoft's home court in Seattle and favors Microsoft in setting the RAND rate for a couple of Motorola SEPs, followed Motorola Mobility's methodology, and feels confident the decision will be appealed.

The detailed methodology will take time to study, but I will comment that in my observation Federal district court judges are more honorable than to simply rule in favor of the local company. And arguing the local party had the home court advantage when your company loses won't persuade many judges to reverse on appeal. A stronger argument may be the judge forced Motorola to accept rates in patent pools it hasn't joined instead of following the relevant standard's body negotiation structure.

Although I appreciate Groklaw's coverage of IP issues, its article stretches a long way in an attempt to rebut Florian Mueller stating it would take 7,000 years at this RAND rate for Google to recoup its price paid for the Motorola patents (Note the SEC papers do not break out the patents separate from the technology so talking about the price paid for the Motorola patents is fiction). Referring back to Groklaw, PJ notes: "Google isn't in the 'let's sue and get a lot of money from royalties on patents' business. That's more a Microsoft strategy. Probably because no one wants Microsoft's products. Google does make money, though, buckets of it, because people like Google's products. I believe that would indicate that Google knows how to make money. Nor did they, or anyone but Florian, ever imagine that they'd get repaid the purchase price by royalties on only two of the many patents that came with the Motorola purchase. That wasn't the plan. It was, from what I read, defensive in nature."

Sure Google makes great products and lots of money. And I agree that the fate of these two patents is not indicative of the strength of the Motorola portfolio, but no one wants Microsoft's products? Most everyone I know uses Apple, Google, and Microsoft products. Most have gotten value and had problems with each company's products at times. To say probably no one wants Microsoft products and suggest its strategy is to make up for it by licensing patents is not persuasive. How did Bill Gates gain and maintain his wealth? Was it by licensing patents or selling products? Beside this case is not about Microsoft's patent licensing; it's about Google's patent licensing effort.

Copyright © 2013 Robert Moll. All rights reserved.

SHIELD Act of 2013 - A Problematic Solution to Patent Trolls

I thought the effort to pass the SHIELD Act died last year, but read Joe Mullin's article tonight: Peeved politicians want "loser pays" rule for patent trolls - SHIELD Act would target patent shell companies, exempt inventors, universities. I was wrong, it's repackaged as the SHIELD Act of 2013! It's changed a bit, but still not a good idea.

Part of the problem is it's a huge departure from centuries of America law. The America rule requires each party in litigation bear its own expenses, including attorney fees. In 1946, the U.S. patent statute was amended to "discourage infringement of a patent by anyone thinking all he would be required to pay if he loses the suit would be a royalty." The Senate Committee at that time noted, "it is not contemplated that the recovery of attorney fees will become an ordinary thing in the patent suits." In 1952, the U.S. patent statute was amended to add that attorney fees would only be recoverable in "exceptional cases." Even then attorney fees are intended to compensate the "good party" for its expenses and not punish the "bad party." So despite the rhetoric U.S. patent law already has a mechanism to tackle patent trolls.

This Act's proposed fee shifting ignores that plus opens a can of worms when parties have vastly different financial resources. For example, if a small company becomes aware a large company is infringing its patent, offers a license, which is ignored, it may need to go to court to seek redress. This bill would encourage defendants to engage a large law firms (many attorneys are assigned to the case) to quickly run up a huge legal bill, which is not difficult if you bill at $600-$1,000/hour, generate a "victory," and hand the entire legal bill (which should belong to the defendant for not exercising any judgment and ignoring the relatively low cost inter partes review in the USPTO) to punish the small company for having the audacity to want to license its patent. Ultimately if passed, the SHIELD Act may just shield large companies who want to freely infringe small companies patented inventions.

The SHIELD Act definitions of a patent troll is also problematic. A company or individual risks being held a patent troll by defendant's motion if (1) it doesn't practice the invention; (2) it doesn't have at least one inventor in its employ; or (3) it is not the original patent owner. Assigning so much importance on practicing the invention has no basis in US patent law. Wouldn't the bill's definition of patent troll be met by companies none of us consider to be patent trolls? For example, is Google forced to litigate as a patent troll under this bill if it seeks to enforce the Motorola Mobility patents? Better not lay off the affected Motorola inventors then. How about Facebook's purchase of AOL and IBM patents? How much practice of the invention suffices to defeat the patent troll label? Could a company avoid the patent troll label by building and selling a prototype? Couldn't someone be exempt from the Act simply by hiring one of the inventors? Maybe plaintiff and defendant could bid for the inventor. Does exempting an original owner but not any subsequent assignee discourage transfer of patents? Congress may mean well, but these types of consequences make the bill worse than the problem.

Copyright © 2013 Robert Moll. All rights reserved.

Google Motorola Mobility - Standard-Essential Patents

When Google acquired Motorola Mobility, it obtained talented engineers, fundamental cell phone technology and a huge number of patents. It is difficult to place a value on a single patent without monetizing it, much less 17,000 patents, but it appears the standard-essential patents (SEPs) obtained in this acquisition have been particularly difficult to value.

As far as litigation, FOSS Patents reports Google (Motorola Mobility) has only won 1 out of 10 SEP cases asserted against Apple, while Samsung has only won 3 out of 24. Further, all Samsung's wins were outside the USA: two in South Korea and one in Netherlands. See Apple to FTC: Samsung and Google lose most of the cases over declared-essential patents

As far as the FTC, the Proposed Consent Order In the Matter of Google Inc., FTC File No. 121-0120, states Google's settlement with the Commission requires Google withdraw its claims for injunctive relief on FRAND-encumbered SEPs around the world, and offer a FRAND license to any company that wants to license Google's SEPs in the future.

The 25 public comments and related filings relating to the FTC-Google proposed consent decree reveal serious company opposition on injunctive relief being granted for FRAND-encumbered SEPs.

In The CCIA and RIM Tell the FTC Banning Injunctions for FRAND Patents Can Make Smartphone Wars Worse Groklaw decries this situation as robbing Google of its property right (Groklaw's concern is surprising) but in the end this will not influence the FTC or the courts.

So we don't know the value of the Motorola Mobility SEPs, but the answer for now is less than many thought. It is not always wonderful that "everybody in the industry" infringes a patent. Maybe this is the time companies realize the risk of over-declarations that certain patents are essential to an industry standard. At least it will be forseeable that seeking injunctive relief against a company stating a willingness to take a license of a SEP will be a problematic endeavor.

Copyright © 2013 Robert Moll. All rights reserved.

Google Agrees to Change Business Practices to Resolve FTC's Concerns

On January 3, 2013,  the FTC announced it has reached an agreement with Google to change some business practices. The agreement, reached after 19 months of investigation, grants competitors the ability to license Google's standard-essential patents (e.g., obtained from the Motorola Mobility acquisition) at fair, reasonable, and non-discriminatory (FRAND) terms. Google cannot seek injunctions of the SEP unless the infringer is unwilling to license the SEP under FRAND and follows certain procedures. The FTC's concern was granting injunctions based on SEPs would be used to hold up competitors in an industry where interoperability is required to compete. The agreement also gives advertisers greater flexibility to use rival search engines.

The FTC's press release Google Agrees to Change Its Business Practices to Resolve FTC Competition Concerns In the Markets for Devices Like Smart Phones, Games and Tablets, and in Online Search has the details and links to the related papers.

Copyright © 2013 Robert Moll. All rights reserved.

Microsoft v. Motorola Mobility - Google's Motorola Standard Essential Patents Not Entitled to Injunction or Hefty Royalty Rate

Today, in Microsoft v. Motorola Mobility, the federal district court judge granted Microsoft's summary judgment motion that Motorola Mobility's standard essential patents (SEP) are not entitled to injunctive relief and will be subject to FRAND. We may see a consensus that we cannot have patent hold ups on SEPs since that gives SEP owners too much negotiating leverage against competitors.

I am a little surprised at how this case evolved. Google's Motorola Mobility would not sign up under  Microsoft's patent licensing program despite the vast majority of Android makers doing so. Second, after Motorola Mobility was sued it didn't think maybe it should settle. Instead it counterclaims that Microsoft XBox infringed patents essential to the H.264 (video codec) or IEEE 802.11 (WiFI, or WLAN) standards. We were talking about my Android, but let's talk about your XBox? Then Motorola insists on injunctive relief and unreasonably high royalty rates on those SEPs?

Despite this Groklaw suggests the judge's decision is based on local bias: Surprise Surprise ... Seattle Judge Grants MS Motion, Bans Injunctions for Motorola's RAND Patents

Groklaw argues the Seattle judge is in Microsoft's home court and handed out a predictable victory to Microsoft based on a sealed motion (i.e., who knows what) that is likely to be appealed. In my opinion, the judge is being unfairly impugned. Motorola lost because it pushed beyond the outer limits of remedies available for SEPs.

Also see other reviews of this decision such as Joe Mullin' In a blow to Android, judge says Moto patents can't get injunctions - Motorola can't use standard-based patents to enjoin Microsoft's Xbox and FOSS Patents' Google's Motorola loses a summary judgment decision after Microsoft FRAND trial.

Copyright © 2012 Robert Moll. All rights reserved.

Apple v. Motorola - Judge Posner Grants Apple's Request for Hearing on Injunctive Relief

Apple and Motorola were scheduled to go to trial in June 2012. In brief, Apple claims that Motorola Droid and Xoom tablet infringe on its patents, while Motorola counterclaims that Apple infringes on one of Motorola's cellphone patent which appears to be a standard essential patent subject to FRAND.

Surprising many court observers, Judge Posner canceled the court date about a week ago, because he had concluded the parties had not proven a basis for a remedy. At that time, Judge Posner noted it was a tentative decision, but he would prepare a full opinion in case he changed his mind.

On June 13, Judge Posner changed his mind granting Apple's request of June 7 for a hearing on injunctive relief on June 20. Judge Posner noted the parties should be prepared to address the eBay factors and the possibility of a reasonable royalties as a substitute for injunctive relief as well as the issue of FRAND.

Here is a link if you are interested in Judge Posner's order of June 13, 2012.

Many readers know this, but just in case I note Judge Posner, handling this at the trial level, normally sits on the Court of Appeals for the Seventh Circuit, which does not handle US patent appeals. Yet, Judge Posner is one of the most respected judges in the USA and has written extensively on antitrust, IP and other legal topics so it is nice he changed his mind so we can get his views on these patent topics.

Copyright © 2012 Robert Moll. All rights reserved.