Venture Beat - Apple and Qualcomm offer billion-dollar sob stories at FTC antitrust trial

In Venture Beat, Jeremy Horwitz reports Apple and Qualcomm offer billion-dollar sob stories at FTC antitrust trial.

The article gives more details on the negotiations leading to the FTC trial than what is described in Wired - The FTC Thinks You Pay Too Much For Smartphones. Here’s Why. For example, the article mentions initially Apple was willing to pay $7.50/phone in 2011 and meet other conditions including advocate against a budding wireless standard WiMax. Then Qualcomm decided to leverage the need for the CDMA chips used by Verizon on the sale of other chips and increase the patent license from $7.50/phone to $8-10/phone plus retain exclusivity. It looks like the "straw that broke the camel's back" as Apple had further developed Intel as a second source for the chips.

Copyright © 2019 Robert Moll. All rights reserved.

Wired - The FTC Thinks You Pay Too Much For Smartphones. Here’s Why

In Wired, The FTC Thinks You Pay Too Much For Smartphones. Here’s Why, FTC is investigating if Qualcomm has committed an antitrust violation (a "tax" on cell phones that drives up prices and hurts competition) in demanding 5% of the value of a cell phone up to $20 max for licensing its patented wireless technology to Apple and Huawei.

From the article:

"Qualcomm charges companies like Apple a set percentage of the total price of a phone in exchange for the right to use its technology, according to the antitrust suit filed by the FTC. The percentages vary, but Qualcomm generally charges 5 percent of the value of a device, up to a maximum of about $20 per device, according to a legal brief filed by Qualcomm. Phone makers like Apple and Huawei argue that Qualcomm demands a larger cut of each phone sale than is fair, but that they pay because Qualcomm essentially threatens to cut off their supply of important wireless chips if they don’t. The FTC describes this as a "tax" on cellular phones that drives up prices and hurts competition.

In court Friday, Apple executive Tony Blevins accused the chipmaker of strong-arm tactics. Blevins said that during negotiations in 2013, Qualcomm president Cristiano Amon told him, "I'm your only choice, and I know Apple can afford to pay it,” CNET reports."

It appears Apple was able to buy its replacement chips from its second source Intel but incurred some delays as it scrambled to integrate the Intel chips to cover for Qualcomm's refusal to reduce its price. It sounds like the mobile computing patent wars have resumed.

Copyright © 2019 Robert Moll. All rights reserved.

IP Watchdog: What Mattered in 2017: Industry Insiders Reflect Biggest Moments in IP

IP Watchdog: What Mattered in 2017: Industry Insiders Reflect Biggest Moments in IP does a nice job of using industry experts to highlight the key events in patent law in 2017.

Copyright © 2017 Robert Moll. All rights reserved.

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.

Samsung Agrees To Not Seek Injunctions In Enforcing Standard Essential Patents (SEPs) In Mobile Communications for Five Years in Europe

ZDNet reports that Samsung waves white flag on patent wars. Perhaps a bit of hyperbole, but still a significant change in Samsung's strategy in enforcing standard essential patents (SEPs) in the mobile computing patent wars in Europe. Thanks to Suzie Lipton-Moll for passing on this article today.

Copyright © 2013 Robert Moll. All rights reserved.

Obama Administration Vetoes ITC's Ban of Older Apple iPhones and iPads

Today, the Obama Administration vetoed the International Trade Commission's (ITC) ban of Apple's infringement of Samsung's standard essential patent.

As background in June 2013, the ITC ordered a ban of AT& T's model of Apple's iPhone 3, iPhone 3GS, iPhone 4, the iPad 3G, and iPad 2 based on infringement of Samsung's U.S. Patent No. 7,706,348. Apple was faced with the ITC ban, an appeal to the Federal Circuit, or a request for the President to veto the ban. The last time a President vetoed an ITC order was in the 1980's so it seemed an appeal to the Federal Circuit was the likely next step.

However, U.S. Trade Representative Michael Froman decided to veto the ITC ban expressing the "concern that a ban on Apple's products would abuse Samsung's right to the essential patent, which involves encoding and decoding information on a CDMA cell phone network." Mr. Froman warned the ITC should carefully examine if a ban based on a standard essential patent serves the public interest before granting it. This is an unexpected setback for Samsung which now must seek a remedy in federal court.

For further details see Mr. Froman's letter explaining the decision and Older iPhones won't be banned as Obama Administration vetoes ITC decision.

Updated August 5: Obama administration may have overturned the ITC ban due to reasons presented in ITC commissioner Dean Pinkert's dissent. See CNN Money How the ITC forced a veto in the Samsung-Apple patent case. Also see FOSS Patents One ITC chief found Samsung to fail to offer Apple FRAND licensing terms to its UMTS patents.

Copyright © 2013 Robert Moll. All rights reserved.

FTC Finalizes Settlement in Google & Motorola Mobility Case

On July 23, the Federal Trade Commission (FTC) approved its Final Order settling allegations that Google had reneged on its commitments to license its standard-essential patents (SEPs) held by its subsidiary Motorola Mobility on fair, reasonable, and non-discriminatory (FRAND) terms and instead pursued or threatened to pursue injunctions and exclusion orders against companies making smart phones, laptop and tablet computers, and gaming consoles.

After considering the twenty-five public comments, the FTC modified certain provisions in the Final Order, including those pertaining to the arbitration to resolve disputes over FRAND terms. The FTC also explained certain provisions in a letter sent to the commenters on July 23.

The FTC noted the proposed Consent Order resolved its concerns regarding Google pursuit of injunctions and exclusion orders based on infringement of SEPs subject to FRAND terms, and established a process to allow implementers of Google's SEPs to obtain a license on FRAND terms and a neutral third party to set those terms.

Copyright © 2013 Robert Moll. All rights reserved.

Introduction to Standards - SSO, FRAND, SEP, Hold-Ups, and Royalty-Stacking

Courts have increasingly been asked to resolve disputes that relate to patents that read on industry standards. A commentator (see Economist article below) notes in the 1990's the US had only two FRAND disputes, while since 2008 the US had 17 FRAND disputes.

How patents relate to standards can be confusing. First, standards are set by committee, very technical, and once adopted taken for granted. Even well known standards such as the protocols for Wi-Fi can be quite technical for many and run thousands of pages. After you digest the technical details of the standard, you have thousands of patents that are declared essential to the standard but unsurprisingly use different terminology. Further, you have quirky terms surrounding the standards such as SSOs (standard setting organizations), FRAND (Fair, Reasonable and Non-Discriminatory) terms, SEP (Standard Essential Patents), and funny concepts like hold-up (Reach for the sky!), and royalty-stacking.

We can't blame the confusion on academics as we have had lots of informative articles on legal aspects of standards. See e.g., Stanford professor Mark Lemley and Cal professor Carl Shapiro's A Simple Approach to Setting Reasonable Royalties for Standard-Essential Patents.

If you need an introduction, I recommend The Economist article Standard procedure - If companies cannot agree on "reasonable" patent royalties, courts must decide. How? It should make standards less mystifying. The article also describes how federal district court judge Robart set the FRAND royalty rates that Microsoft should pay Google for licensing the Motorola Mobility patents relating to IEEE 802.11 (Wi-Fi) and H.264 (Advanced Video Coding).

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.

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.

DOJ & USPTO Policy Statement on Remedies for Standards-Essential Patents Subject to FRAND

The FTC and DOJ/USPTO have different opinions on what should trigger an injunction for infringement of a standard essential patent (SEP).

See the FTC 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.

See U.S. Department of Justice, Antitrust Division (DOJ) and the U.S. Patent and Trademark Office (USPTO) Policy Statement on Remedies for Standards-Essential Patents Subject to Voluntary F/RAND Commitments.

Also see McDonnell Boehnen Hulbert & Berghoff LLP's article: FRAND and Injunctive Relief: Exploring a Standard-Essential Patent Owners Right to Injunctive Relief

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.

Google's Patent Strategy - Some of Apple's Patented Inventions Are De facto Standards

John Paczkoski's Some Apple Inventions Are So Great They Ought To Be Shared explains Google's and Apple's respective patent strategies. I found Google's patent strategy interesting in view of the on-going discussions regarding remedies available for infringement of standard essential patents in the ITC.

As most readers know, Google paid $12.5 billion for Motorola Mobility obtaining many standard essential patents (SEP). Apple may be concerned that Google's strategy is to enforce the SEPs to get a cross-license to Apple's commercially successful non-SEP patents on the iPhone.

Apple and Google's GC's have now staked out positions on how their respective patents should be viewed before the Senate Judiciary Commitee.

Google's GC Kent Walker's letter to the Senate Judiciary Committee argues "proprietary non-standardized technologies that become ubiquitous due to their popularity with consumers should be considered de facto standards."

Apple's GC Bruce Sewell responded in a letter to the Senate Judiciary Committee: "That a proprietary technology becomes quite popular does not transform it into a ‘standard’ subject to the same legal constraints as true standards."

As Mr. Paczkoski states: "Standardized technologies facilitate interoperability among disparate devices by giving them the same core functionality. They create a platform for competition. Non-standardized technologies differentiate those devices, create competition and drive innovation in the marketplace. Subjecting non-standards-essential patents to the same rules as those governing standards-essential ones will hamper innovation and harm consumers."

In my view, if a U.S. patent is not encompassing an industry standard, commercial success should not subject the patent to FRAND and limit a patent owner's rights to an injunction. Otherwise, free riders will eliminate the incentive to spend resources to innovate.

Copyright © 2012 Robert Moll. All rights reserved.

DOJ Closes Investigations of Google's Acquisition of Motorola Mobility and Apple, Microsoft and RIM's Acquisitions of the Nortel Patents

On February 13, 2012, the Department of Justice's Antitrust Division issued a statement that it is closing the investigations of Google's acquisition of Motorola Mobility, Apple's acquisition of patents held by CPTN (formerly owned by Novell), and Apple, Microsoft, RIM and other's acquisition of the Nortel patents. DOJ believes each acquisition is unlikely to substantially lessen competition given Apple and Microsoft's clear commitment to license its standard essential patents (SEP) on fair, reasonable, and non-discriminatory (FRAND) terms and not seek an injunction on the SEPs. In contrast, the DOJ appears to criticize Google's unwillingness to make a clear commitment on future use of its patents. The DOJ also stated a willingness to jump into the fray to stop any anticompetitive use of SEP rights. Hopefully, the DOJ's statement and analysis will bring some order in the mobile computing patent war. I think this is welcome news for consumers (Click here for the DOJ's statement)

Copyright © 2012 Robert Moll. All rights reserved.