Quick Thoughts: Apple’s IPR Thermonuclear War is More Like Whac-A-Mole

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–          A busy few weeks for Apple’s legal war– the U.S. case vs. Motorola and a U.K case vs. HTC were dismissed, while a U.S. case vs. Samsung yielded preliminary injunctions against 2 products.

–          The “Thermonuclear War” is more like “Whac-A-Mole”.  Cases must be brought narrowly – in specific countries, against specific companies, targeting specific products, and citing specific patents.

–          Samsung will offer a workaround, skirting the cited patents, “imminently”.  The U.K. court declared 3 Apple patents invalid.  The MOT judge found Apple’s licensing position unreasonable.

–          Apple cannot ban Android, and even if it could, it would face massive and painful anti-trust action.  The end game must be negotiated cross licenses, likely royalty bearing to Apple, with all rivals.

Welcome to year four of Steve Job’s “Thermonuclear War” against Android, otherwise known as Apple’s global “Whack-a-Mole” tournament.  This week, the U.K. High Court issued a ruling in Apple vs. HTC, invalidating 3 of the 4 patents cited and finding that HTC did not infringe against the fourth.  A week ago, Judge Lucy Koh, of the U.S. District Court in California, granted a preliminary injunction against Samsung’s Galaxy Tab 10.1 tablet and its Galaxy Nexus smartphone based on her finding that the Apple patents asserted in that case would likely be found as both valid and infringed upon.  A month ago, Judge Richard Posner, a renowned circuit court Judge who specifically requested the assignment to the case on the Northern Illinois District Court, dismissed Apple’s case against Motorola (and Motorola’s countersuit against Apple) with prejudice, meaning it can be appealed but not brought again.

Three cases against three rivals in three different courts, about the same or similar patents, resulted in three very different outcomes.  Judge Koh found that Apple’s patent for unified search, essentially using a single query to simultaneously search both the Internet and the device itself, was sufficiently important to the functionality of an iPhone that Samsung’s devices employing a similar search function as part of Android could impart irreparable harm to Apple during the time it would take to complete the trial that could not be remedied by monetary damages.  Judge Posner ruled that the patents cited in his case may be valid and may have been infringed upon, but that Apple had come to no harm as a result of any infringement, noting that the products in question could be easily adapted to avoid the patents if necessary.  Judge Floyd’s decision for HTC in the U.K. denied that HTC had infringed upon any of the Apple patents in question and follows a decision by the International Trade Commission (ITC) not to ban imports of HTC products into the U.S.

I find Judge Posner’s logic impeccable. There are tens if not hundreds of thousands of patented ideas inherent in a product as complex as a smartphone or tablet.  Save for those that are necessary to adhere to industry standards, and thus, are governed by a requirement to licensed to all comers on a “fair, reasonable and non-discriminatory” (FRAND) basis, no single patent has been unearthed for which a reasonable workaround could not be implemented.  While Judge Koh is in obvious disagreement, credible reports suggest that Samsung and Google will release a workaround software patch “imminently” that would remove infringement of the universal search patent, thus making Judge Posner’s point.  Consumers are not choosing an iPhone or a Galaxy Nexus on the basis of this single patent – sales results post workaround will likely prove it – and if not, Apple should not have been entitled to injunctive relief, and may not be entitled to monetary damages either.

As the Samsung/Apple case proceeds to trial, Apple will certainly file an appeal of the Motorola dismissal.  While anything can happen on appeal as a case wends its way to the Supreme Court, it is useful to consider Judge Posner’s standing in the legal community.  Richard Posner normally sits on the 7th Circuit Court of Appeals, the last stop before the Supreme Court, and is also a senior lecturer at the University of Chicago School of Law and a leading scholar in the “law and economics” field, tying interpretation of the law to sound economic analysis.  He is, reputedly, the single most cited Judge in history, meaning more case law has been based on his rulings than on any other single Judge.  That he requested assignment to a lower court to hear this patent case speaks to the importance that he places on patent law reform and his intention to put his influence toward insisting on greater concreteness for patents, an idea that appears to have some political momentum in Congress.  If I read the tea leaves correctly, it would suggest that the value of Apple’s collection of concept-heavy design patents may erode with the years that it will take its many pronged legal strategy to play out.

A part of this is a closer review of patent validity.  Precedent in patent law holds that patents are not valid if preceded by “prior art” or if the patented idea would be obvious to an experienced person in the field.  Design patents, which govern the way devices look and the manner in which users operate them, are particularly vulnerable to validity challenges, as evidenced by the U.K. Court decision.  Even when patents are deemed valid, they are often subject to a significant narrowing of scope.  For example, if Apple argues that its patent for “slide to unlock” should be broad enough to include all touch screen gestures used to activate a device, it is much more likely to run into prior art and/or be dismissed as obvious than if it narrowly defines it as a left to right sliding icon used to open a phone’s home screen.  However, under the more specific definition, Android’s pull an icon out of a circle to unlock is no longer covered by the patent.  Along the way, Apple is forced to either put its patents at risk of being found invalid by their generality or rendering them ineffective by virtue of their specificity.  If a negotiated cross license is the end game, better to negotiate before patents are rendered inert.

The argument for negotiation is bolstered by the arduous product by product, country by country process of fighting infringement in the courts.  Judge Koh temporarily banned two Android products pending a workaround.  There are dozens of other products being produced by Samsung and hundreds of Android products produced by other companies that are completely unaffected by this ruling.  These products are based on software that is being overhauled on an every 6 months schedule.  By the time that the Samsung/Apple trial is complete, the Galaxy Tab 10.1 and Galaxy Nexus will be long obsolete.  Apple will have to sue again on the new products, using different patents – surely if the patents asserted in the first case survive the trial and appeals, Android will permanently work around them.  Repeat this again and again on a changing roster of companies and in an array of different countries.  This is “Whac-A-Mole” – even if you manage to knock one mole back into its hole, another pops up, and another, and another.

The bright spot for Apple is that these moles have been shockingly ineffective in asserting their own patents back against Apple.  Most of the Intellectual Property that has been used against Apple by Motorola, Samsung and others is of the standards essential variety that is governed by the FRAND principals.  Ostensibly, all of the rival device makers have signed on to the standards setting organizations, and in doing so, have explicitly agreed to abide by FRAND.  As such, these companies must license to Apple on exactly the same terms as they license everybody else.  In contrast, Apple’s design-based IPR may be squishy and hard to defend, but it is under no obligation to license it to anyone.

However, license it they must.  Even if Apple could use patent litigation to wipe Android off of the map (and it already knows that it can’t), the elimination of the iPhone and iPad’s biggest rival would put the company square in the cross hairs of anti-trust litigation.  The U.S. DoJ nearly broke Microsoft forcibly into pieces for trying to integrate its Internet Explorer directly into Windows, eventually extracting a consent decree that blocked Microsoft from favoring its own software on the PC platform.  Apple, which has been busy integrating dozens of functions directly into iOS and extracting rents to allow apps onto its system, would be badly damaged by a similar requirement.  Meanwhile, this global patent war is costing Apple shareholders hundreds of millions of dollars annually for very little potential benefit.  It is time to set emotions aside, give up the dreams of thermonuclear war, and settle for the hefty royalty checks that would likely be forthcoming.

For our full research notes, please visit our published research site.

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