Judge Crabb Explains Dismissal of Apple v. Motorola(groklaw.net)
groklaw.net
Judge Crabb Explains Dismissal of Apple v. Motorola
http://www.groklaw.net/article.php?story=20121115220940955
19 comments
> For those of you who thought that Motorola has been violating the law on its FRAND obligations this is a reality-check.
I don't see how that follows from the rest of your comment. It is quite possible for Motorola to be breaking their commitments to FRAND licensing it just isn't going to be tested in this case. [I agree with the rest of your comment.]
I'm going to read the article now but even if you are right then that is really bad news for the world as owners of standards essential patents have the power to bring whole industries to gridlock and to demand massive sums for patent licensing.
Edit: I've read it now. As i read it there is nothing that closes the question of whether Motorola is breaching it's contract with ETSI. The judge doesn't want to spend time to decide a FRAND value if that doesn't close the case (because Apple aren't committed to pay the price). I stand by my point that this does nothing to decide whether Motorola has breached their commitments. I didn't see any comment regarding anti-trust law from this judge and I don't know if that topic was ever on the table in this case.
I don't see how that follows from the rest of your comment. It is quite possible for Motorola to be breaking their commitments to FRAND licensing it just isn't going to be tested in this case. [I agree with the rest of your comment.]
I'm going to read the article now but even if you are right then that is really bad news for the world as owners of standards essential patents have the power to bring whole industries to gridlock and to demand massive sums for patent licensing.
Edit: I've read it now. As i read it there is nothing that closes the question of whether Motorola is breaching it's contract with ETSI. The judge doesn't want to spend time to decide a FRAND value if that doesn't close the case (because Apple aren't committed to pay the price). I stand by my point that this does nothing to decide whether Motorola has breached their commitments. I didn't see any comment regarding anti-trust law from this judge and I don't know if that topic was ever on the table in this case.
>I'm going to read the article now but even if you are right then that is really bad news for the world as owners of standards essential patents have the power to bring whole industries to gridlock and to demand massive sums for patent licensing.
I don't think it's that bad, considering where FRAND comes from: It's a contract term they put into agreements that industry bodies require members to adhere to before they'll accept known patented technologies into industry standards. If it turns out that the courts interpret it to mean something disastrous then they'll just start using a different term for future standards. Or just put the actual licensing price in the contract.
In theory that would still leave a problem for all the existing standards, but I don't see how that problem is significantly worse than the existing problem with submarine patents that were never FRAND in the first place because the patentees didn't participate in the standards process.
>I didn't see any comment regarding anti-trust law from this judge and I don't know if that topic was ever on the table in this case.
The relationship between patents and antitrust is by nature inscrutable. The whole point of a patent is to create a temporary monopoly to reward the inventor with monopoly profits. But the patent is only supposed to cover the claims -- so when a patent is essential for a standard, the patent inherently can be used to block implementation of the standard, including those aspects of it that supposedly aren't covered by the claims.
The result is a situation where either you de facto prohibit the patentee from enforcing the patent against any infringer (i.e. everyone) who is implementing the standard (perhaps in exchange for some almost certainly below-market royalty chosen arbitrarily by the courts), or you de facto allow the patentee to expand the scope of the patent to the entire standard rather than only the claims as it ought to be. There isn't really a lot of middle ground: You have to pick whether you want meaningful patents (else anyone can just make a standard around it and claim a right to violate the patent's guarantee of exclusivity) or meaningful antitrust (else anyone can allow their submarine patents into a standard and then sue the world). There is no guarantee that the courts will be able to find a solution to that capable of making everyone happy.
I don't think it's that bad, considering where FRAND comes from: It's a contract term they put into agreements that industry bodies require members to adhere to before they'll accept known patented technologies into industry standards. If it turns out that the courts interpret it to mean something disastrous then they'll just start using a different term for future standards. Or just put the actual licensing price in the contract.
In theory that would still leave a problem for all the existing standards, but I don't see how that problem is significantly worse than the existing problem with submarine patents that were never FRAND in the first place because the patentees didn't participate in the standards process.
>I didn't see any comment regarding anti-trust law from this judge and I don't know if that topic was ever on the table in this case.
The relationship between patents and antitrust is by nature inscrutable. The whole point of a patent is to create a temporary monopoly to reward the inventor with monopoly profits. But the patent is only supposed to cover the claims -- so when a patent is essential for a standard, the patent inherently can be used to block implementation of the standard, including those aspects of it that supposedly aren't covered by the claims.
The result is a situation where either you de facto prohibit the patentee from enforcing the patent against any infringer (i.e. everyone) who is implementing the standard (perhaps in exchange for some almost certainly below-market royalty chosen arbitrarily by the courts), or you de facto allow the patentee to expand the scope of the patent to the entire standard rather than only the claims as it ought to be. There isn't really a lot of middle ground: You have to pick whether you want meaningful patents (else anyone can just make a standard around it and claim a right to violate the patent's guarantee of exclusivity) or meaningful antitrust (else anyone can allow their submarine patents into a standard and then sue the world). There is no guarantee that the courts will be able to find a solution to that capable of making everyone happy.
You are right that standards going forward may be able to rewrite the conditions BUT they cannot set the license prices themselves that would be anti-competitive against the patent holders* . And it could render existing standards for video encoding, mobile telephony, wifi, bluetooth and many more unusable or at least with rising costs if two or three patent holders each try to squeeze as much as they can out each standard.
The anti-trust aspect comes in because the patent only becomes important because of it's inclusion by the standards body(/industry cartel).
The patent owner has the monopoly on the technology but they cannot form a cartel to push people to implement the technology they have a monopoly on (unless they make FRAND or similar commitments).
[* A former colleague of mine led the establishment of a group to create an industry standard outside of ETSI although the output was later submitted there to become one of their standards. The line he had to walk to get it legally set up correctly was tricky with massive fines on the member companies if the European Commission decided that he had got it wrong (anti-competitive behaviour can be fined upto 10% of group global turnover and Sony was doing a bit better then than now).]
Edit: Got my * right without italics
The anti-trust aspect comes in because the patent only becomes important because of it's inclusion by the standards body(/industry cartel).
The patent owner has the monopoly on the technology but they cannot form a cartel to push people to implement the technology they have a monopoly on (unless they make FRAND or similar commitments).
[* A former colleague of mine led the establishment of a group to create an industry standard outside of ETSI although the output was later submitted there to become one of their standards. The line he had to walk to get it legally set up correctly was tricky with massive fines on the member companies if the European Commission decided that he had got it wrong (anti-competitive behaviour can be fined upto 10% of group global turnover and Sony was doing a bit better then than now).]
Edit: Got my * right without italics
>You are right that standards going forward may be able to rewrite the conditions BUT they cannot set the license prices themselves that would be anti-competitive against the patent holders*
I'm not going to pretend to know the antitrust laws in any given jurisdiction, but do you see what I mean by inscrutable? It's fine (and indeed mandatory) to require "fair and reasonable non-discriminatory" terms, but nailing down an upper bound on what that actually means as a number is anti-competitive? It doesn't make any sense because it can't. Patents and antitrust are diametrically opposed things that happen to overlap one another.
I'm not going to pretend to know the antitrust laws in any given jurisdiction, but do you see what I mean by inscrutable? It's fine (and indeed mandatory) to require "fair and reasonable non-discriminatory" terms, but nailing down an upper bound on what that actually means as a number is anti-competitive? It doesn't make any sense because it can't. Patents and antitrust are diametrically opposed things that happen to overlap one another.
Yes it's a mess. But it does make some sense as standards bodies may have members without patents that want to minimise the price and others who want to get high prices.
I'm not a lawyer but I wonder if there is room to require patent holders to declare a cap on the price of each patent before it is included in the patent and the standards group could decide to accept or reject the patent at that point.
I'm not a lawyer but I wonder if there is room to require patent holders to declare a cap on the price of each patent before it is included in the patent and the standards group could decide to accept or reject the patent at that point.
If anything makes the case for the complete abolition of the patent system, then the so called
FRAND patents are it. It's interesting to see how the notion is completely lost on some supporters
of the FRAND patent regime. Their argument is fundamentally the same as the people who reject
the notion of patents to begin with. It typically boils down to "Unfair!". Just much embellished
with useless appeals to emotion that differ not a whit from the arguments made against the patent
system in general. For example: "But how would my <pet company> be allowed to participate in the
market if someone OWNS this territory!?!one1eleven?". And: "This is not good for the consumer!".
Except of course when exactly the same argument is made against the patent system in general. A lovely little retort to that has become a favorite refuge of the patent supporters: "You just want to - " -- wait for it -- "STEAL!". Apparently, elementary logic is unavailable to the so called inventors. Because, believe it or not, an argument has even been made that you're not an inventor, unless you support the patent system. Even more, an argument has been made that you're dirty thief... unless you support the patent system.
The patent system has outlived its usefulness. Nay, it hasn't been useful since day one. It arrived stillborn, and its zombie has been haunting the inventors world over ever since it's been exhumed.
An impassioned appeal you say? A thousand times yes. The patent system is an unethical social construct that has been perpetrated upon and abused... against countless honest, fair folks who want nothing more than to practice the fruits of their labor. Many, many times their labor is a function of an independent discovery. This is often challenged by patent supporters as impossible. Their argument boils down to: "You can't invent FFT! Only the patent supporters can!"
Last of course, but far from least is the fundamental hypocrisy of this all: if you were to enumerate everything the patent supporters use to practice their art, you will invariably find their contribution insignificant, nay, not even visible when placed against the foundational background. They readily accept locking out entire swaths of science and technology for themselves, without ever acknowledging the monumental contribution of people... mathematicians, scientists... GIANTS!
Those giants, in their generosity and brilliance have made our world better. The patent system, I would argue, has made our world worse.
Except of course when exactly the same argument is made against the patent system in general. A lovely little retort to that has become a favorite refuge of the patent supporters: "You just want to - " -- wait for it -- "STEAL!". Apparently, elementary logic is unavailable to the so called inventors. Because, believe it or not, an argument has even been made that you're not an inventor, unless you support the patent system. Even more, an argument has been made that you're dirty thief... unless you support the patent system.
The patent system has outlived its usefulness. Nay, it hasn't been useful since day one. It arrived stillborn, and its zombie has been haunting the inventors world over ever since it's been exhumed.
An impassioned appeal you say? A thousand times yes. The patent system is an unethical social construct that has been perpetrated upon and abused... against countless honest, fair folks who want nothing more than to practice the fruits of their labor. Many, many times their labor is a function of an independent discovery. This is often challenged by patent supporters as impossible. Their argument boils down to: "You can't invent FFT! Only the patent supporters can!"
Last of course, but far from least is the fundamental hypocrisy of this all: if you were to enumerate everything the patent supporters use to practice their art, you will invariably find their contribution insignificant, nay, not even visible when placed against the foundational background. They readily accept locking out entire swaths of science and technology for themselves, without ever acknowledging the monumental contribution of people... mathematicians, scientists... GIANTS!
Those giants, in their generosity and brilliance have made our world better. The patent system, I would argue, has made our world worse.
The patent system may need fixing, abolishing in certain fields or even complete abolition but that doesn't mean FRAND abusers are worse than all other sorts of patent trolls because there is no way to work around them.
FRAND is a necessary part of keeping the dysfunctional system working at all and while I see no prospect of patents overall being abolished I don't think that is a bad thing.
What is the difference between an illegal cartel of competitors fixing the market and a standards setting body?
The answer lies in the rules standards bodies put in place to ensure that OTHER companies not in the group can compete in the market created around the standard. One of these rules is FRAND commitments on patents to ensure that standards body members that get their patents into the standard (which they nearly try to and do) cannot just try to claim ALL the profit from every competitor by setting significant license fees.
Edit: Typos/spelling errors. Unfortunately can't fix "it's" in my other comment though.
FRAND is a necessary part of keeping the dysfunctional system working at all and while I see no prospect of patents overall being abolished I don't think that is a bad thing.
What is the difference between an illegal cartel of competitors fixing the market and a standards setting body?
The answer lies in the rules standards bodies put in place to ensure that OTHER companies not in the group can compete in the market created around the standard. One of these rules is FRAND commitments on patents to ensure that standards body members that get their patents into the standard (which they nearly try to and do) cannot just try to claim ALL the profit from every competitor by setting significant license fees.
Edit: Typos/spelling errors. Unfortunately can't fix "it's" in my other comment though.
In a system without patents, collusion would be checked by increased competition.
As it is, FRAND patents are irrelevant, because as it has been already shown, some
companies fail to disclose, others refuse to play... and are not required to boot.
But even if all companies played by the FRAND rules, there would still be fundamental unfairness in the system, not unlike one that FRAND proponents point out. That unfairness lies in the fact that FRAND or not, unscrupulous incumbents will relentlessly seek any 'redress' against newcomers. In other words, they will hammer you with any patent they think they have a good chance of flattening you with. This goes a long way to furthering their ability to form cartels, especially among the big incumbents with thousands of patents.
As an aside, I also find the cognitive dissonance exhibited in these debates quite entertaining. On the one hand we have the contingent that proclaims that "GREED is good!", a la Mr. Gekko. Nice. If they can prevent you from practicing your very own idea, they would. But then, the very same contingent all of a sudden grows a moral backbone when they resort to the arguments: "But you stole my ideaz?!?".
I reject any notion that FRAND regime is special. If you're not invited to be a party to a standard, then create your own. The 'can't work around' argument doesn't hold water.
The same exact, 'can't work around' argument is often very applicable to any patent discussion. At least in the case of copyrights, we have the merger doctrine. In the case of patents, if someone managed to lock up fundamental methods, good luck. In fact, the system is so screwed that it's possible for someone to lock up methods that they didn't even discover.
Herein lies another problem however: creating your own standard would not absolve you of any territorial squabbles. In fact, in that case, and now being outside the umbrella of FRAND, unscrupulous incumbents will try to make this quite impossible for you, with the patents supporters, and particularly the FRAND crowd uttering nary a whisper.
But even if all companies played by the FRAND rules, there would still be fundamental unfairness in the system, not unlike one that FRAND proponents point out. That unfairness lies in the fact that FRAND or not, unscrupulous incumbents will relentlessly seek any 'redress' against newcomers. In other words, they will hammer you with any patent they think they have a good chance of flattening you with. This goes a long way to furthering their ability to form cartels, especially among the big incumbents with thousands of patents.
As an aside, I also find the cognitive dissonance exhibited in these debates quite entertaining. On the one hand we have the contingent that proclaims that "GREED is good!", a la Mr. Gekko. Nice. If they can prevent you from practicing your very own idea, they would. But then, the very same contingent all of a sudden grows a moral backbone when they resort to the arguments: "But you stole my ideaz?!?".
I reject any notion that FRAND regime is special. If you're not invited to be a party to a standard, then create your own. The 'can't work around' argument doesn't hold water.
The same exact, 'can't work around' argument is often very applicable to any patent discussion. At least in the case of copyrights, we have the merger doctrine. In the case of patents, if someone managed to lock up fundamental methods, good luck. In fact, the system is so screwed that it's possible for someone to lock up methods that they didn't even discover.
Herein lies another problem however: creating your own standard would not absolve you of any territorial squabbles. In fact, in that case, and now being outside the umbrella of FRAND, unscrupulous incumbents will try to make this quite impossible for you, with the patents supporters, and particularly the FRAND crowd uttering nary a whisper.
I'm not (in this argument) arguing against the idea that a world without patents wouldn't be better. It might but that is a whole other discussion. In this world patents exist and FRAND commitments enable significant amounts of commerce and standardisation to proceed.
FRAND is not irrelevant, most companies meet their commitment and massive numbers (of possibly dubious) patents can be licensed quite cheaply in many areas. Samsung and Motorola are trying abuse their Standards Essential Patents in several areas and are risking this whole system (at least in Samsung's case possibly at great risk to themselves in the medium term).
You say FRAND is irrelevant because some companies aren't following it but I think they form the minority and it is yet to be seen if they get away with it. Rambus didn't (although it took years) and Motorola is in another suit with Microsoft which may yet enforce some FRAND rules. Plus anti-trust authorities in the US (I think) and Europe have at least been taking an interest in this area although no actual proceedings have been brought they could still be.
If I want to build a device to connect to the mobile phone network I need to follow the standards.
If I want to build a device to connect to connect to wifi I need to follow the standards.
If I want to process video that is available from just about anywhere I need to follow the standards.
If I want to design a new UI I can choose to develop something new (and patent it if I want), use something published but non patented (hard to find), use something old (>20 years), take a license to something patented or take my chances getting sued. Only the last two options are open when developing to a standard.
At the moment if a single company (without a monopoly position) develops a new "standard" they can license it how they want because they are not breaking competition law and won't have entered any commitments. That doesn't make it OK for competitors to act together to do this.
FRAND is not irrelevant, most companies meet their commitment and massive numbers (of possibly dubious) patents can be licensed quite cheaply in many areas. Samsung and Motorola are trying abuse their Standards Essential Patents in several areas and are risking this whole system (at least in Samsung's case possibly at great risk to themselves in the medium term).
You say FRAND is irrelevant because some companies aren't following it but I think they form the minority and it is yet to be seen if they get away with it. Rambus didn't (although it took years) and Motorola is in another suit with Microsoft which may yet enforce some FRAND rules. Plus anti-trust authorities in the US (I think) and Europe have at least been taking an interest in this area although no actual proceedings have been brought they could still be.
If I want to build a device to connect to the mobile phone network I need to follow the standards.
If I want to build a device to connect to connect to wifi I need to follow the standards.
If I want to process video that is available from just about anywhere I need to follow the standards.
If I want to design a new UI I can choose to develop something new (and patent it if I want), use something published but non patented (hard to find), use something old (>20 years), take a license to something patented or take my chances getting sued. Only the last two options are open when developing to a standard.
At the moment if a single company (without a monopoly position) develops a new "standard" they can license it how they want because they are not breaking competition law and won't have entered any commitments. That doesn't make it OK for competitors to act together to do this.
Here's my understanding/oversimplification of the history of of this lawsuit.
The basis was laid in the Nokia-Apple lawsuit over FRAND patents. During negotiations for the license of Nokia's FRAND patents, Nokia asked for a cross-license to Apple's UI patents instead of money. Apple said no, negotiations fell apart and the matter went to court.
In court, both parties lost. Nokia didn't get the cross-license they wanted. Instead, they got a ridiculous amount of money out of Apple.
Precedent has now been set that FRAND patents can be worth a ridiculous amount of money. Motorola/Google now also want a ridiculous amount of money for their FRAND patents.
My assumption is that what Google really wants is a cross-license, that their demand for ridiculous amounts of money is only a negotiating position. The alternative thesis, that Google has gone over to the dark side, is looking increasingly plausible though.
The basis was laid in the Nokia-Apple lawsuit over FRAND patents. During negotiations for the license of Nokia's FRAND patents, Nokia asked for a cross-license to Apple's UI patents instead of money. Apple said no, negotiations fell apart and the matter went to court.
In court, both parties lost. Nokia didn't get the cross-license they wanted. Instead, they got a ridiculous amount of money out of Apple.
Precedent has now been set that FRAND patents can be worth a ridiculous amount of money. Motorola/Google now also want a ridiculous amount of money for their FRAND patents.
My assumption is that what Google really wants is a cross-license, that their demand for ridiculous amounts of money is only a negotiating position. The alternative thesis, that Google has gone over to the dark side, is looking increasingly plausible though.
I don't think that's anywhere near a correct summary. First of all, AFAIK Apple and Nokia settled out of court. So there was no legal precedent.
Second, it was already well-established that FRAND patents could be worth silly amounts of money, not just a cross-licensing poker chip. For example Qualcomm and Nokia had an extended series of lawsuits over 15 years, including exactly the kinds of antics that are going on now (e.g. complaints to authorities about misuse of FRAND patents). The final lawsuit was settled such that Nokia licensed Qualcomms patents for $billions (much more than Apple paid Nokia), while Qualcomm didn't license Nokia's patents (giving Nokia the option of going after Qualcomm's customers).
Third, the amounts that Google is demanding aren't actually ridiculous by the standards of the industry. And sure, what Google is really after is likely a cross-licensing deal, given Apple's and Microsoft's patent extortion rates.
Second, it was already well-established that FRAND patents could be worth silly amounts of money, not just a cross-licensing poker chip. For example Qualcomm and Nokia had an extended series of lawsuits over 15 years, including exactly the kinds of antics that are going on now (e.g. complaints to authorities about misuse of FRAND patents). The final lawsuit was settled such that Nokia licensed Qualcomms patents for $billions (much more than Apple paid Nokia), while Qualcomm didn't license Nokia's patents (giving Nokia the option of going after Qualcomm's customers).
Third, the amounts that Google is demanding aren't actually ridiculous by the standards of the industry. And sure, what Google is really after is likely a cross-licensing deal, given Apple's and Microsoft's patent extortion rates.
Thanks for the corrections. In other words, I think I got the gist right, but so many details wrong that calling my synopsis "wrong" would be accurate. Unfortunately, it appears that your reply isn't quite stand-alone. If it was I'd just delete my post and let your very informative one be the only one people had to read.
I'm not sure why you'd imagine Google ever wasn't on the "dark side". They're a company. They exist to make a profit. Anything else is just PR and attempts at image manipulation.
The world is more complicated than "all corporations are inherently evil."
I don't believe all companies are inherently evil. I was making assumptions about what was meant by "the dark side" based on what people usually want to believe about google.
The most concerning part of all of this is that the concept of patent exhaustion has been weakened.
It is going to cause massive distress to the entire electronics industry if you can no longer purchase a component and expect to be indemnified against upstream patent infringement.
Will be interesting if CSIRO for example can sue everyone that implements WiFi.
It is going to cause massive distress to the entire electronics industry if you can no longer purchase a component and expect to be indemnified against upstream patent infringement.
Will be interesting if CSIRO for example can sue everyone that implements WiFi.
Isn't there some famous quote about the best way to reveal the unjustices of a bad law is to enforce it vigorously?
--
I've had this perverse fantasy that some asshole would create a patent troll company that goes around specifically targeting Microsoft, Apple, and IBM's customers vigorously (the companies can protect themselves quite well which is why you would want to go after their customers) with patent threats to make them feel some pain from these shitty laws they keep propping up and extending.
Alas, trolls seem to go after small companies and startups (unrelated to the big guys) and MS, Apple, and IBM get by relatively unscathed.
But that's just me pretending to be tough. That doesn't really seem like a nice way of fixing things.
--
I've had this perverse fantasy that some asshole would create a patent troll company that goes around specifically targeting Microsoft, Apple, and IBM's customers vigorously (the companies can protect themselves quite well which is why you would want to go after their customers) with patent threats to make them feel some pain from these shitty laws they keep propping up and extending.
Alas, trolls seem to go after small companies and startups (unrelated to the big guys) and MS, Apple, and IBM get by relatively unscathed.
But that's just me pretending to be tough. That doesn't really seem like a nice way of fixing things.
Has it? I agree that if the concept has been weakened it would be very bad but I haven't seen that covered regarding this case.
Are you referring to this specific case or arguments Motorola was making in other cases?
Are you referring to this specific case or arguments Motorola was making in other cases?
The order starts off explaining why she earlier thought she should take up the case, and force Motorola to specific FRAND licensing terms.
Motorola then demanded that Apple agree to the Judge's determination of the specific licensing terms.
When Apple then said they'd only take the licensing terms set by the Judge as an upper-bound, and agree to the licensing terms only if it was under a dollar per phone, the Judge realized that any trial would only serve as a negotiating strategy for Apple setting an upper-bound, and that the subject under trial was far too complex for the Judge to issue a specific performance, and was more amenable to a binding arbitration.
It's great to read how the Judge modified her thought process as the trial went along [for 18 months], and how Apple's strategy backfired when Motorola demanded that the outcome of the trial be binding on Apple.
For those of you who thought that Motorola has been violating the law on its FRAND obligations this is a reality-check.
The order is a relatively easy read, and quite candid in showing how a Judge would change her thoughts as a case progressed through many stages.
[edit] added Judge's quote