Reuters - U.S. judge rules Qualcomm owes Apple nearly $1 billion rebate payment

The mobile computing patent war never stops (too much money at stake).

This week Reuters reports: "A U.S. federal judge has issued a preliminary ruling that Qualcomm Inc. owes Apple Inc. nearly $1 billion in patent royalty rebate payments, though the decision is unlikely to result in Qualcomm writing a check to Apple because of other developments in the dispute."

As background, Qualcomm threatened to withhold mobile chips if Apple refused to pay a significant increase in the patent royalty rate. I don't think it is the smartest move to attempt to strong arm Apple with patents, but then life is about learning.

As stated in Reuters: "contract factories that built Apple’s iPhones would pay Qualcomm billions of dollars per year for the use of Qualcomm’s patented technology in iPhones, a cost that Apple would reimburse the contract factories for. Separately, Qualcomm and Apple had a cooperation agreement under which Qualcomm would pay Apple a rebate on the iPhone patent payments if Apple agreed not to attack in court or with regulators. In a lawsuit filed two years ago, Apple sued Qualcomm, alleging that the chip supplier had broken the cooperation agreement by not paying nearly $1 billion in patent royalty rebates."

Apple instructed the contract factories to quit paying the royalties to Qualcomm offset the missing rebates.

"Qualcomm in turn alleged that it stopped paying the rebate payments because Apple had broken the agreement by urging other smartphone makers to complain to regulators and making “false and misleading” statements to the Korean Fair Trade Commission, which was investigating Qualcomm over antitrust allegations. Apple responded that it was making lawful responses to regulators in an ongoing investigation."

So mobile computing patent war continues global, and expensive. For now the court has sided with Apple so maybe settlement would be smart especially as Intel moves into position with another source of mobile chips.

For details see U.S. judge rules Qualcomm owes Apple nearly $1 billion rebate payment

Copyright © 2019 Robert Moll. All rights reserved.

Supreme Court - Kimble v. Marvel Entertainment - Patent Owner Cannot Charge Royalties After Term Expires

In Kimble v. Marvel Entertainment, LLC, the U.S. Supreme Court declined to overrule its earlier decision in Brulotte v. Thys Co. that a patent owner cannot charge royalties for use of a patented invention after the patent term expires.

Brulotte has been the law for fifty years so I don't think this recent decision is that surprising. Perhaps more interesting is the fact the Supreme Court granted little credit to the economic arguments raised to overrule Brulotte and the idea "bad economics" should trump long standing US patent law.

Copyright © 2015 Robert Moll. All rights reserved.

US Supreme Court - Oral Arguments Transcript - Kimble v. Marvel Enterprises, Inc.

The US Supreme Court heard oral arguments in Kimble v. Marvel Enterprises, Inc.

The issue in Kimble: Whether this Court should overrule Brulotte v. Thys Co., which held that "a patentee's use of a royalty agreement that projects beyond the expiration date of the patent is unlawful per se."

Here's a PDF copy of the transcript of the oral arguments.

Copyright © 2015 Robert Moll. All rights reserved.

US Supreme Court - Oral Arguments in Kimble v. Marvel and Commil USA v. Cisco Systems on March 31

On March 31, the US Supreme Court hears oral arguments in the patent cases: Kimble v. Marvel Enterprises and Commil USA, LLC v. Cisco Systems.

The issue in Commil USA: Whether the Federal Circuit erred in holding that a defendant's belief that a patent is invalid is a defense to induced infringement under 35 U.S.C. § 271(b).

The issue in Kimble: Whether this Court should overrule Brulotte v. Thys Co., which held that "a patentee's use of a royalty agreement that projects beyond the expiration date of the patent is unlawful per se."

The SCOTUS blog will be live blogging the oral arguments at 9:45 am ET.

Copyright © 2015 Robert Moll. All rights reserved.

Professor Robin Feldman - Kimble v. Marvel Enterprises - Royalty Payments Beyond the Patent Term?

Professor Robin Feldman filed a Supreme Court amicus brief in Kimble v. Marvel Enterprises which is before the U.S. Supreme Court. This case reviews whether a patent owner's use of a royalty agreement that projects beyond the expiration date of the patent is unlawful per se. 

Some of the highlights from that brief co-authored with professor Alice Armitage:

"The case concerns contracts in which the patent holder insists on receiving royalty payments after the patent expires. The doctrine of patent misuse, however, frowns on attempts to expand the time or scope of the patent.

Over the last few decades, some lower courts have tried to eliminate the doctrine of patent misuse by holding that patent misuse exists only if the behavior rises to the level of an antitrust violation

Petitioners in this case ask the Supreme Court to apply the antitrust rule of reason to patent misuse cases. The antitrust rule of reason, which is complex and burdensome, is commonly perceived to be the death knell for any antitrust case and would certainly be the death knell for patent misuse cases

In the brief, Professor Feldman argues that patent law is not antitrust law, and antitrust tests are not appropriate for patent law questions.

Antitrust law is primarily concerned with parties that have market power, but the patent rules apply to all patent holders, regardless of whether they have market power; One cannot ask the patent office to extend the patent for a few years because 20 years is not long enough to determine its true value. That is a decision for Congress to make.

Nothing changes if the 20-year term is ill-suited for a particular industry, such as the life sciences. (A number of life science groups have filed amicus briefs as ell.) Any arguments to this effect are appropriately directed to Congress.

It is certainly true that when the patent term ends, the patent holder will no longer be able to exclude all others from the use of its invention. With the patent system, however, every potential innovator matters. A contract provision that limits the capacity and incentive for even one potential innovator to make scientific leaps after the expiration of the patent disrupts the balances created by Congress in the Patent Act.

Professor Feldman urges the Court to clarify that antitrust principles are not appropriate for a patent law, and to allow the courts to develop flexible approaches, based on patent principles, to this types of licensing issues."

Copyright © 2015 Robert Moll. All rights reserved.

Supreme Court - Kimble v. Marvel Entertainment - Reviewing If A Patent Licensee Must Pay After Patent Expiration

Today, the US Supreme Court granted a petition for certiorari in Kimble v. Marvel Entertainment Inc. to review if a patent licensee has an obligation to pay royalties after patent expiration.

As background, U.S. Patent No. 5,072,856 to Kimble (Kimble) relates to a Spider-Man glove, which Kimble discussed with Marvel's predecessor. Marvel decided it could make the "Web Blaster" without Kimble's help. Kimble sued for patent infringement and breach of an oral agreement. A district court granted summary judgment of non-infringement, but a jury decided Marvel breached the agreement. This led to a settlement where Marvel agreed to buy the patent and pay royalties on future sales. The patent expired but the contract required Marvel to continue to pay royalties for sales. Kimble sued for breach of contract when the settlement unraveled. Marvel filed a DJ arguing successfully that Kimble couldn't get royalties for post-expiration sales. The Ninth Circuit opinion affirmed. Kimble filed a petition for certiorari to the Supreme Court.

The petitioner asked Brulotte v. Thys Co. (1964) be overruled. Brulotte had held a royalty agreement that goes beyond patent expiration is unlawful per se. The petitioner argued "Brulotte is the most widely criticized of this Court’s intellectual property and competition law decisions. Three panels of the courts of appeals (including the panel below), the Justice Department, the Federal Trade Commission, and virtually every treatise and article in the field have called on this Court to reconsider Brulotte, and to replace its rigid per se prohibition on post expiration patent royalties with a contextualized rule of reason analysis."

Note the Solicitor General's brief advised against review, since it said Brulotte is not about competition, but the Court's interpretation of federal patent law of allowing free access to an invention after the patent expires.

Also see Marvel's opposition brief.

Copyright © 2014 Robert Moll. All rights reserved.

Joe Mullin - Court: Google Infringed Patents, Must Pay 1.36% of Adwords Revenue

Today, in Court: Google infringed patents, must pay 1.36% of AdWords revenue, Joe Mullin reports that U.S. District Court Judge Raymond Jackson awarded Vringo the royalty it sought for Google's infringement of the Lycos patents. Last week Judge Jackson ruled that Google's design around of the Adword software was not "colorably different" from the old infringing software. Google is appealing the infringement verdict and the royalty rate decision to the Federal Circuit.

See my related articles:

Vringo v. Google - Laches Dashing Expectations - From $493M to $31M?

USPTO Confirms Validity of U.S. Patent No. 6,314,420, Which Vringo Asserts Against Google.

Copyright © 2014 Robert Moll. All rights reserved.

Microsoft Making $2 Billion Annually From Android Patent Royalties

The Business Insider reports Microsoft Is Making An Astonishing $2 Billion Per Year From Android Patent Royalties. Even more amazing is the analyst's estimated 95% margins on this revenue stream. Is this right and is this fruit from Bill Gates' decision to hire x-IBM patent licensing guru Marshall Phelps? Thanks to Suzie Lipton-Moll for passing this article my way tonight.

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.

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.

Vringo v. Google - Laches Dashing Expectations - From $493M to $31M?

The recent Vringo v. Google patent infringement case illustrates an issue that may arise for prospective licensors and licensees. In a nutshell, Vringo purchased U.S. Patent No. 6,314,420 and U.S. Patent No. 6,775,664 from Lycos, filed a lawsuit in September 2011 claiming Google's system of advertising infringed the patents, and stated it expect to recover $493 million. At the end of trial, the jury held the patents infringed and not invalid, but only awarded $31 million against Google et al. based on a 3.5% royalty rate on a 20% increase attributable to the invention.

Why didn't Vringo receive $493 million? You might think it wasn't realistic and mere saber rattling to encourage Google to settle before trial. But as I looked further, I learned Vringo assumed it would get damages for infringement from 2005 to 2011, since U.S. patent law permits damages up to six year prior to the filing of the lawsuit (i.e., September 2011).

During this trial, there was a fair amount of trading going on. On the last day of a two-week trial, Mr. Dan Ravicher disclosed he was shorting Vringo (VRNG) in Vringo vs. Google: Outcome Probabilities. In his opinion, Vringo had not established Google was aware of the patents and had failed to elicit sufficient jury sympathy to support damages of $493 million. He estimated the net present value to Vringo was $95 million.

Vringo's facts would not generate much jury sympathy. Vringo had not invented anything and had bought the patents from a search engine company that Google had passed long ago. Its press releases saying Google's revenue would go to zero and Vringo would make billions sounded of hubris. Vringo trial slides were cartoon-like. Vringo told the jury Google's SmartAdServingSystem ("Google's SmartASS") infringed the patents. For some of the slides see Mr. Mullin's article: Google infringes old Lycos patents, must pay $30 million.

Much more than lack of jury sympathy, laches reduced Vringo's damages. Under the equitable doctrine of laches defense: (1) if a patent owner unreasonably and inexcusably delays filing an infringement suit, and (2) the alleged infringer has been materially prejudiced by the delay, a patent owner cannot recover damages that occurred before the complaint was filed. The statute says Vringo could get damages up to six years prior to filing the complaint, but a judge can rule in equity to supplement statutory law to achieve a fair result.

The Vringo lawsuit had laches written all over it from the beginning. The '420 patent issued 11 years ago, November 6, 2001, and the '664 patent issued over eight years ago, August 10, 2004. Even six years of delay raises a rebuttal presumption of laches. It's true a patent owner may "burst" the presumption by producing evidence sufficient to raise an issue the delay was reasonable or excusable under the circumstances, but Vringo was unable to do it. Thus, laches precluded recovery before the complaint was filed in September 2011. A six year period of infringement was reduced to one year. I guess the judge wasn't sympathetic.

Whenever a patent is enforced near the end of its term, you must consider laches. For more about laches, I suggest the Federal Circuit's case A.C. Aukerman Co. v. R.L Chaides Construction and cases citing Aukerman.

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.