In the smart device patent war, all eyes are on Apple's San Jose
federal court trial against Samsung, in which Samsung's lawyers
at Quinn Emanuel Urquhart & Sullivan have given courtroom
observers lots of opportunity for second-guessing. But another
team of Quinn Emanuel lawyers, this one representing Motorola,
on Friday received a summary judgment loss from U.S. District
Judge Barbara Crabb in Madison, Wisconsin, that could be as
important for Apple as the outcome in San Jose.
The Wisconsin litigation grew out of a patent infringement
suit Motorola filed against Apple at the U.S. International
Trade Commission in October 2010. Apple responded with
antitrust, unfair competition and breach of contract
counterclaims, asserting that Motorola was abusing its power as
the owner of patents adopted by standard-setting bodies, which
are supposed to be licensed on fair and reasonable terms.
Apple's counterclaims at the ITC were removed to Crabb's federal
courtroom in Wisconsin.
The Wisconsin counterclaims, as Crabb's decision recounted,
are just one strand in the web of litigation between Apple and
Motorola (and, by extension, Google). Apple's allegations,
however, go to the core of the smart device IP war. As I've
previously explained, both Apple and Microsoft claim that
Motorola was obliged to license standard-essential patents under
its agreements with the international organizations that
determine common technological standards. Motorola, they argue,
shouldn't be permitted to sue them for infringing these
standard-essential patents but should instead be compelled to
license its essential technology on reasonable terms. The same
theory underlies the European Union's reported antitrust
investigation of Motorola.
Microsoft has already won crucial support for its theory
that Motorola breached commitments to license its technology
from U.S. District Judge James Robart in Seattle. In a ruling in
June, Robart held that Motorola's agreements with the
standard-setting bodies require it to license its IP to third
parties, including Microsoft. (Robart stopped short of granting Microsoft summary judgment on its claim that Motorola's $4.5
billion licensing offer was unreasonable because he said he
didn't have enough information to decide.)
In Friday's decision, Crabb agreed with Robart on the hugely
important contractual point. She ruled that Motorola's
agreements with the standard-setting bodies are contracts and
that Apple is a third-party beneficiary of those agreements.
Crabb rejected Motorola's arguments that its agreements didn't
constitute contracts because neither the standard-setting bodies
nor third parties have the power to enforce Motorola's promises.
She said the agreements, on their face, require Motorola to
license its technology on reasonable, non-discriminatory terms.
The judge did not decide whether Motorola breached its
contracts, writing that Apple must still prove (among other
things) that Motorola's opening offer to license its tech to
Apple at a 2.25 percent royalty rate was discriminatory and
unreasonable. She also granted Motorola summary judgment on
Apple's antitrust and unfair competition claims, finding that
because they were filed as counterclaims to Motorola's ITC suit,
they're barred by the Noerr-Pennington doctrine. (In case you've
forgotten, Noerr-Pennington holds that defendants who "petition
the government" to seek redress are immune from antitrust claims
based on that petition; a patent infringement suit counts as a
petition for redress.)
But according to a leading authority on standard-setting
patents, Jorge Contreras of American University's Washington
College of Law, what's significant is the one-two punch of
Robart's and Crabb's rulings that Microsoft and Apple are
third-party beneficiaries of Motorola's commitments to the
standard-setting bodies. "To say that Apple can enforce these
agreements makes the whole world a third party," Contreras said.
"It's twisting around traditional contract law."
Contreras said he's not arguing that Motorola should be off
the hook if it refused to license standard-essential patents on
fair terms, but he's concerned that in searching for a way to
hold Motorola responsible -- and to counter Motorola's
infringement claims -- lawyers for Microsoft and Apple devised a
"strained" theory of Motorola's contract obligations. The
endorsement of that theory by judges Robart and Crabb could have
unintended consequences for standard-setting bodies, he said,
which could affect developing technology. (Contreras argues for
a sort of capped royalty system, in which the license fee for
essential technology is divided among those who contributed
standard-essential patents, but that spins us into the realm of
theory.)
I left word for media contacts at Motorola and Apple --
which was represented by Covington & Burling; Weil, Gotshal &
Manges; and Tensegrity Law Group -- but didn't hear back.
(This post has been corrected. A previous version misspelled
Judge Crabb's name.)
(Reporting by Alison Frankel)
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