Quick Thoughts: Dispatches from Steve Job’s “Thermonuclear War”

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The Android Patent War: An Apple trade claim could bar imports of its competitors – December 5, 2011, The Wall Street Journal

December is a busy month in the patent wars.  On Friday, a U.S. District Court in California denied Apple’s request for an injunction against four Samsung products.  On the same day, a German Court held its third hearing on separate infringement issues raised by Motorola against Apple.  On Wednesday, the U.S. International Trade Commission will issue its ruling on Apple’s infringement claims against HTC, with an import embargo of infringing products the only remedy available (Exhibit 1).

Let’s start in California, where Apple was seeking injunction on the Galaxy S 4G, Infuse 4G, Droid Charge, and the Galaxy Tab 10.1 based on four design-based patents.  To grant an injunction, U.S. courts require not only that a finding of infringement is likely, but also that the IPR holder would suffer irreparable harm that could not be remedied by a financial payment at a later date if the injunction is not granted.  Apple failed to convince the Judge that these standards were met, and thus, injunction denied.  This removes a powerful weapon from Apple’s arsenal against Android licensees in the U.S., weakening its stance in negotiating royalty agreements in the process.

Ultimately, much of Apple’s litigation against the Android ecosystem worldwide is based on product design patents, both in the physical configuration of the device and the software interface, rather than on “hard science”.  The first stop for the defense in any IPR litigation is to show that the patent in question is based on prior art, that is the innovation has already been shown in other products prior to the patent, or that it is an obvious, incremental step, and thus unworthy of a patent.  This is much easier to do with design patents.   For example, Apple has been asserting a patent for a rectangular touch-screen tablet with a glass front and four evenly rounded corners.  In the California case, Samsung presented a 1994 study by Knight Ridder that postulated a tablet-like touch screen reader, and in Germany, it introduced the 1969 film “2001: A Space Odyssey”  into evidence, as it showed Mars bound astronauts using a similar device 9 years earlier than it was launched in real life.

Apple may have a better chance at an embargo at the ITC, where its motion will be decided by majority vote of a 6 person appointed commission.  As the WSJ opinion piece linked above (sorry for linking a restricted article, but I figured most of you would have a WSJ subscription) notes, the ITC is an anachronism with a substantial power that is often wielded in seemingly arbitrary fashion.  In this case, the ITC staff had recommended that the injunction be denied, but the Administrative Law Judge assigned to the case reversed the recommendation and ruled that an injunction was due on two Apple patents, pending appeal to the ITC commissioners.  If the commissioners reach the same conclusions, then President Obama will have 60 days to waive the ruling before the embargo takes effect.  This ruling is of particular interest, in that Apple has similar claims under way at the ITC against Samsung and Motorola.

Of course, even in the event of an embargo or an injunction, the infringing party can always re-engineer their products to sidestep the specific patents in question.  For example, in Germany, Apple was granted a preliminary injunction against Samsung’s Galaxy Tab 10.1 tablet based on the aspect of its tablet patent concerning an “all glass face”.  Samsung has quickly come to market with the Galaxy Tab 10.1N, which includes a metal bezel around the screen, prompting Apple to demand an injunction on the new product.  A hearing is scheduled for December 22.  If Apple manages to win another injunction based on a broader interpretation of its patent, we can expect another work around from Samsung, but more importantly, it makes it far more likely that the preliminary findings will be thrown out by the court during the actual trial, as it will be even easier to show prior art and to assert that the patented innovations are obvious.

In the same way, it can be assumed that HTC will be back in the US market quickly, with re-engineered products that skirt the specific patents.  Product lifecyles in the mobile device market are short and the asserted patents are not so central to the character and functionality of HTC’s Android products that non-infringing work-arounds would have a noticable effect on their consumer appeal.  Of course, Apple could then begin the process anew with fresh claims against the new products with the ITC and in various court jurisdictions.  Ultimately, the real winners are the lawyers.

Of course, Apple is getting a taste of its own medicine in Germany, as Motorola has asserted its own IPR against Apple products in three separate actions.  The first got off to a terrible start for Apple, which failed to meet a court filing deadline and received a default judgment barring Apple sales in Germany.  Apple was granted a stay, pending a hearing scheduled on February 3, 2012, but the action puts Apple on its heels at the start and missing a deadline demonstrates that even Apple’s legal resources may be running thin.  A second hearing in mid-November, with Motorola asserting patents against Apple’s European distribution arm – N.B. German courts allow separate actions against various subsidiaries of a parent company – appeared to support Motorola’s position against all Apple products that support iCloud or MobileMe, which is, all iPhones and iPads, prompting Apple to request that any injunction require Motorola to post a bond to reimburse it for lost sales should the eventual trial verdict invalidate Motorola’s claims.  The third hearing was inconclusive, according to Foss Patents website guru Florian Mueller.

A quick note on the “Fair, Reasonable, and Non-Discriminatory” (FRAND) terms that all standards body participants agree for licensing IPR that is essential to complying with a public technical standard.  This principle dictates that all companies have equal access to essential technology licenses at market established terms.  A company accused of infringement can claim that the asserted patents should be subject to FRAND licensing, taking injunctions off of the table and establishing a specific basis for damages.  Non-essential IPR carries no such FRAND requirement, but typically, leaves room for the accused infringer to redesign their products to avoid the patents in question.  In its defense against Motorola, Apple is claiming that the patents in question should be subject to FRAND although the preliminary hearings do not suggest that the German courts entirely agree.

Considering the whole of the mobile platform patent war, we remain firmly convinced that it must end in comprehensive cross-licensing spanning the industry.  Steve Job’s emotional call to thermonuclear war against Android aside, IPR litigation is too expensive and time consuming to be worth taking all the way to the end.  Design patents, which have been the core of Apple’s claims against the Android ecosystem, offer the out of a work-around redesign, making it hard to keep opponents out of the market.  Since infringement suits must be brought against specific products, each generation of phones and tablets will require a new wave of litigation.  Apple may be able to gain a modest royalty stream by licensing its IPR to its competitors, but it Steve Jobs’ vow to “destroy Android” is likely an empty threat.   As for his threat of “Thermonuclear War”, to quote the movie WarGames, “The only winning move is not to play.”

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

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