The next great turning point in the war for global device
domination comes next month, when Motorola faces two trials --
one against Apple, the other against Microsoft -- that will
determine its ability to use its portfolio of standard-essential
patents as leverage in IP disputes with its competitors. I've
been harping on this theme for a while, but trials have a way of
sharpening the issues. Both of these cases will be tried to
judges, not juries, so we won't get immediate results. But when
U.S. District Judge Barbara Crabb in Madison, Wisconsin, and
U.S. District Judge James Robart in Seattle issue rulings,
Motorola and its rivals should have a very clear understanding
of how valuable Motorola's patents on essential wireless
technology are.
The Apple trial -- which will decide whether Motorola
breached its agreements with international standard-setting
bodies by failing to license essential technology to Apple on
fair and reasonable terms -- is scheduled to begin in Wisconsin
on Nov. 5, but the Microsoft case in Seattle, which begins on
Nov. 13, could hold greater industrywide interest. When he
denied summary judgment to both Microsoft and Motorola in June,
Robart said he needed more information about what exactly
constitutes a fair licensing deal on standard-essential
technology before he could ask a jury to decide whether Motorola
breached its obligation to license its IP to Microsoft. He
called for a bench trial to determine a reasonable royalty rate
-- an exercise that will likely expose Motorola's licensing
agreements with other counterparties and will certainly give
every other Motorola licensee a starting point in future
negotiations.
Over the summer, Motorola's lawyers at Ropes & Gray and the
Summit Law Group attempted to reshape the bench trial before
Robart. In a motion for summary judgment they filed in July, the
Motorola lawyers said that Robart's proposed rate-setting
exercise would improperly set the terms of a contract that does
not exist between Microsoft and Motorola. "There is no existing
licensing contract between Motorola and Microsoft," they wrote.
"Instead, Motorola submits that there is simply a right to a
license. Thus, there is no existing contract for the court to
interpret or in which the court can merely 'fill in' gaps."
The November trial, Motorola argued, should be before a jury
and should address only Microsoft's allegations that Motorola
breached its agreements with the standard-setting bodies. If the
jury ruled against Motorola, the brief argued, then the parties
could resume negotiations, and, if they once again failed to
reach a licensing deal, they could return to court.
In a 23-page ruling Wednesday, Robart rejected Motorola's
motion. He reminded Motorola that he has previously found that
its agreements with the standard-setting bodies require it to
license its technology to Microsoft on fair and reasonable terms
-- not merely that it is required to engage in negotiations. And
if Microsoft and Motorola can't agree on fair terms en route to
the licensing deal Microsoft is entitled to, Robart wrote, "the
courthouse acts as an appropriate forum to resolve disputes over
legal rights."
Robart was emboldened by a ruling last month by the 9th Circuit Court of Appeals, which affirmed the injunction heissued in April against Motorola's enforcement of relief against
Microsoft in a German patent infringement case. The 9th Circuit,
he said, has agreed that Microsoft is contractually entitled to
a fair and reasonable licensing agreement with Motorola. If the
only way to get there is to determine a fair and reasonable
rate, he said, "the court declines to dismiss from Microsoft's
possible remedies the very license agreement to which the court
has already determined it is entitled."
So the Nov. 13 trial will go off as planned, the judge said:
He will determine a reasonable royalty for Motorola's standard
essential patents. You can be sure the entire smart device
industry will be watching.
I left messages with a Motorola spokeswoman but didn't hear
back. Microsoft is represented in the Seattle case by Calfo
Harrigan Leyh & Eakes and Sidley Austin.
(Reporting by Alison Frankel)
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