There was a hearing in the 9th Circuit Court of Appeals on September 11th that centered on Microsoft and Motorola's dispute over Motorola's standards-essential patents that Microsoft uses but so far has refused to pay a penny for. And that gives us an opportunity to look a little more closely at what I have now decided to nickname the Microsoft Standards Patents Shell Game. Apple is holding hands with Microsoft and singing the same tune, as we noticed the other day.
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We can't read what happened at the hearing, but we can read the briefs filed by both sides, and what a tale they tell. The context is this: Motorola obtained an order from a German court that Microsoft is infringing two of Motorola's standards-essential patents, and the court ordered an injunction blocking certain Microsoft products, including the XBox, from Germany.
[ Update: You can listen to the hearing now, if you have Windows Media Player.]
That alone surprises you, does it not? It might, if all you've been reading is about how owners of FRAND or RAND patents are sinning against the holy spirit if they try to stop infringement of their patents with injunctions.
Anyway, as it turns out, in Germany, the rules on RAND patents are that you absolutely can ask for an injunction, and there is a process where the defendant can opt to let the plaintiff set a price and then challenge it in court rather than accept an injunction. They call it the Orange Book Standard process.
But that isn't what Microsoft did. Instead it ran to its home court in Washington State, where lo and behold it got a judge to order a stay on the German injunction until the Washington State court can rule.
How can a US court order a German court to do anything? Good question. As you will see, that is what the appeal by Motorola is all about. I'll show you the details, using the briefs. Here they are, beginning with Motorola's opening brief, all PDFs:
To set the stage first, here's The Recorder's Scott Graham's detailed account of the hearing, providing an excellent overview:
The U.S. Court of Appeals for the Ninth Circuit doesn't get to hear many patent cases. But on Tuesday, it got a doozy.
Motorola challenges the idea that it's a contract case that can be pursued as Microsoft is doing it, but the order said it was, due to Microsoft being, the lower court ruled, a third-party beneficiary of the RAND commitment Motorola made. If so, it's a contract without a price, Motorola pointed out, an element that normally is required for a contract to be one.
Microsoft v. Motorola, 12-35352, featured two of the country's leading appellate advocates arguing for two of the world's largest technology companies. At issue were a demand for $4 billion in royalties, a U.S. court's authority to block a German court's injunction and — the likely dispositive issue — whether federal judges can impose licensing terms on companies that issue standards-essential patents.
Motorola Inc. attorney Kathleen Sullivan argued that a Seattle federal judge has wrongly asserted authority "to create a global license from scratch" for Motorola patents on wireless networking and video coding. Not only that, the judge issued "an extraordinary and unprecedented" order that blocks Motorola from enforcing a German court injunction against Microsoft Corp.'s infringement.
But Carter Phillips, representing Microsoft, said the problem was Motorola's "outrageous" $4 billion royalty demand, despite its promise to license at a reasonable and nondiscriminatory rate. "It has agreed to license its products on a global basis," he said. "It didn't agree to do it everywhere except in Germany."
Patent appeals are normally heard in the Federal Circuit. But the dispute over Motorola's patents, now owned by Google Inc., is before the Ninth Circuit because it's technically a contract case.
The usual way you do a contract is the parties sit down, figure out what they can each live with, including a price or some equivalent benefit, with obligations on both sides, which in a contract is called the consideration, then draw up the agreement in writing with the legal obligations spelled out in the event of failure to perform, and then each signs it, before witnesses and a notary public. Then, if either side breaches, the law will uphold the contract. That's why you put in there what you agree is to happen in the event of a breach.
In fact, contracts are what keep the wheels of the legal system turning, as badly written contracts or ethically-challenged parties cause a lot of litigation. The thing is, at that point, the parties are bound by the terms they signed (under normal circumstances -- if one side was holding a gun to the other party's head to get him to sign, or one party was seven years old or had Alzheimer's, the contract may not be valid).
Under FRAND (or RAND) practice, it's not like that at all. Let's read how Andy Updegrove explains the way it works in his
article from February, "Everything You Always Wanted to Know About FRAND (But didn’t know who to ask)":
Q: In what context are these terms used?
So, the owner of the standards-essential patent lets the world know it agrees to license on reasonable terms, but the specifics depend on the standards body. It varies. But in general, that's the promise that others in the field rely on when they choose to make some patent part of a standard. There is no specific price set. There is a promise to negotiate the price in good faith, and it must be less than extortion. The owner, if it sees someone using his patent without a license, will make an offer to license at price X, and then both sides negotiate the real, final price, which can depend on a number of factors, and normally good faith on both sides results in a license. If after good-faith negotiations the parties fail to agree on a price, then you can ask a court to resolve the price.
A: Standards setting organizations (SSOs) require those that help create a standard (and sometimes all of the members of the SSO) to state before a standard is approved for implementation whether they have any patent claims that would be unavoidably infringed by someone implementing the standard (such claims are referred to as “Necessary” or “Essential” Claims in SSO intellectual property rights (IPR) policies). If a member does, or may, have such claims, they are required to state which of up to three elections it will make in connection with those claims (whether all three alternatives are permitted depends on the SSO):
- they will license their Necessary Claims without charge, and otherwise on FRAND terms, to implementers of the standard (they can also agree to simply not assert their Necessary Claims against implementers)
The extra requirements in the third alternative are quite important, because they allow the working group to try and "design around" the withheld claims. Some SSOs require those choosing the second alternative to identify the claims, and the effected portion of the standard, as well, so that the working group members can decide whether to try to design their way around the claims in order to avoid the chance that implementers may have to pay a royalty.
- they make the same commitment, but reserve the right to charge a royalty or other fee, which must be reasonable in amount
- they refuse to license one or more Necessary Claims, and identify those claims, and the portions of the draft standard that would result in the infringement.
Q: Fair enough. But what does this really mean?
A: Ah, now there’s an interesting question. First, let’s look a little more closely at what the constituent words in these acronyms mean at a high level.
First, there’s “Fair” and “Reasonable.” It’s obvious that words like these at least mean “not exploitive or extortionate.” But that gets us only so far down the road.
It’s also obvious that these are comparative words, so by nature, they imply that there is some sort of benchmark in relation to which fairness and reasonableness can be measured. But what would that benchmark be?
Interestingly enough, there really isn’t one. In fact, the parties to a lot of recent litigation, between individual companies (like Broadcom and Qualcomm) and between regulators and companies (like the European Commission and the U.S. Federal Trade Commission (FTC), on the one hand, and Rambus, on the other hand) have grappled at length with this issue.
And it’s trickier than first meets the eye, as the FTC found out to its sorrow when it tried to punish Rambus. By definition, a standard grants a monopoly power to the owner of a Necessary Claim under that standard. So should fair and reasonable be determined by reference to a situation where there are multiple ways to build something – a commodity situation – or where there is only one way – a monopoly situation?
Another dynamic that makes the pricing terms really tricky is that an implementer will often need to license other patent claims from the same company in order to build their product, and the patent owner will price those claims along with the Necessary Claims for a single, bundled price. So how can you tell how much is allocable to the Necessary Claims, and how much to the other claims?
Suffice it to say that while there has been an increasing amount of litigation on this subject, there hasn’t yet been enough to generate a clear legal definition upon which the marketplace can rely.
But, as you'll see, when Motorola sent a letter to Microsoft, it says Microsoft, instead of negotiating a price with a counteroffer, filed a lawsuit in Washington State, accusing Motorola of asking for too much money and defining that as a violation of its RAND commitments, a contract breach in other words, and now the judge, instead of telling Microsoft to negotiate in good faith, as is the normal procedure, seems to buy the idea that she can set a worldwide price for these patents, even though, as Motorola is arguing, Germany has its own laws and the US has no jurisdiction there.
If there is no agreement on precise terms, where is the contract? The judge sees one. But a FRAND promise is a promise to negotiate fairly, a contract to contract, at best, and Microsoft doesn't want to negotiate terms with Motorola. It wants a court to set the price, a friendly local court, not the court in Germany. Or it may just want to use the case to try to change the law in the US to devalue standards-essential patents and make it impossible for those owning them to seek injunctions to enforce. That is not, by the way, what the owners believed was the case when they long ago allowed their technology to become the standard. Some contract, where the pea keeps moving from shell to shell.
Keep in mind that the German court has already ruled that Microsoft is infringing these patents, and yet Microsoft has yet to pay a single penny or even make a counteroffer.
Since when does a US judge get to tell a German court what it can and can't do, you are probably asking? Ah, there is one way, and it's smack dab in the middle of this case. And it's a process that Motorola believes is inappropriately being used here, which is what the appeal is all about.
Kathleen Sullivan for Motorola is with Quinn, Emanuel, Samsung's law firm also in the Apple v. Samsung case, if you recall. She is listed on their appeal, as a matter of fact. And Carter Phillips for Microsoft is with the firm of Sidley Austin. They are both great firms, and this is a star turn on both sides.
Graham says both sides got some strong questions from the court at the hearing. Was Microsoft's litigation gambit exhibiting bad faith? One of the judges declared that "inherent" in RAND commitments is that you can't get an injunction, citing Judge Richard Posner. But that's not actually the law in Germany, and Posner was stating what he thought the law *should* be here in the US, not in Germany, Sullivan responded.
It isn't the law in the US either, not yet, unless you think Judge Posner is the US Supreme Court, but Microsoft would like it to be and so it keeps declaring it to be so, and it's certainly pushing it to be so. So is Apple, which just filed a complaint against Samsung for alleged FRAND abuse in South Korea, so the beat goes on.
It's a legal strategy in other words. Samsung and Motorola built the world that Apple and Microsoft now want to enter, and the early creators each have foundational patents that neither of the newcomers can build smartphones without infringing, so they want to pay less and they want to be immune from the threat of injunction, while being free to seek them on their own, non-standards-essential patents. It's a game, and that is all it is, despite the rhetoric.
explained in his article on FRAND, back when Google was still in the process of buying Motorola and dealing with regulators about it, that Microsoft was already trying to get the change started:
Q: That doesn’t sound good. But still, in those market sectors where Necessary Claims assertions are infrequent, why don’t SSOs just change their IPR Policies to require – what do you call them – FRAND-Free policies? Ah. Microsoft trying to make Google look bad.
That's the very price Motorola asked Microsoft to pay in its opening offer to license, by the way, the price that Microsoft now claims is so outrageous it constitutes a violation of FRAND obligations, justifying this lawsuit, but I notice that Google was allowed to buy Motorola Mobility and as you can see, Google did *not* agree to give up its rights to seek an injunction or guarantee to ask for less.
A: (Usually, they’re called FRAND-Z, where the Z stands for “zero,” as in “zero cost”).
Well, it’s interesting you should say this. Some major multinational companies, like IBM, are increasingly advocating for FRAND-Z policies.
And Microsoft, which has traditionally argued for FRAND as the default rule for SSO IPR Policies, last week said that it would not [added:] seek an injunction against sales of standards-compliant products where the implementer had not secured a FRAND license from Microsoft, and where
assert non-FRAND royalty rights in essential claims against standards implementers, even where Microsoft it had not helped develop those standards, or was otherwise bound by a FRAND obligation (e.g., where it had acquired a patent that was already subject to a FRAND obligation), and therefore had no obligation to limit their demands. That was a very powerful statement, and quite a change of policy.
Q. So why did they do that?
A: Well, the proximate cause (as a scientist would say), was that Microsoft presumably wanted to make Google look bad. You see, Google is trying to acquire a key mobile company called Motorola Mobility, and European and U.S. regulators have to approve that acquisition before it can go through. Motorola Mobility owns a variety of patents, including patents with Necessary Claims, which apply to mobile devices. Google told the regulators that it would not charge an implementer more than 2.25% of a device’s net cost to use Google’s patents. And it also reserved the right to seek an injunction when an implementer refused to sign a license upon those terms.
It can negotiate, of course, downward, but there is no FRAND obligation not to go above a certain set price, and Motorola says this is the price others pay. You are supposed to negotiate in good faith, the step Microsoft skipped. My main point here is that Google couldn't have reserved those rights if they didn't exist lawfully.
In other words, this is an area where the rules used to be one way, even according to Microsoft, and now it wants the law to change to a new way. And it may be successful -- it's certainly worked so far with this Seattle judge -- but it hasn't been successful yet overall. But Microsoft, and Apple, are lodging accusations in various courts and regulatory bodies as if the new way they want to be the law already was the law.
Imagine if you will how many companies will allow their patents to be FRAND-licensed if the result is that they have no way to enforce them against entities that simply refuse to pay anything at all, as Microsoft has been doing or even not enough to make the deal worth it. I'm explaining it as they see it. Personally, I think the solution is FRAND-Z, which would work with the GPL. But the whole world of patents doesn't agree with me yet that open standards should be freely available to everyone.
Here's what Posner actually wrote about injunctions, from AllThingsD's account, and you can read the entire ruling there as well:
“To begin with Motorola’s injunctive claim, I don’t see how, given FRAND, I would be justified in enjoining Apple from infringing the ’898 [patent] unless Apple refuses to pay a royalty that meets the FRAND requirement,” Posner wrote. ”By committing to license its patents on FRAND terms, Motorola committed to license the ’898 [patent] to anyone willing to pay a FRAND royalty and thus implicitly acknowledged that a royalty is adequate compensation for a license to use that patent. How could it do otherwise? How could it be permitted to enjoin Apple from using an invention that it contends Apple must use if it wants to make a cell phone with UMTS telecommunications capability — without which it would not be a cell phone.”
I added the emphasis to show you that Posner did not say that injunctions were never allowed. He just didn't. I hope the judge was misquoted.
If the only problem is the price, a court can establish that price if the parties have negotiated in good faith and still can't reach an agreement. What Motorola says is that Microsoft sued instead of negotiating, seeking to have a Washington State judge set the price instead of the German court that already ordered an injunction against Microsoft.
See the shell game? Don't look over here. Look over *there*.
So, let's get to the briefs, now that we have the overall context. No doubt the same points we'll be reading in the briefs were discussed at the hearing, or the important ones anyway.
I'll just excerpt for space considerations, but you can read it all in the PDFs, if you find you get interested and want more details.
We'll start with Motorola's opening brief, where it tells its story to the court. To understand what it argues, you need to understand that the word 'comity' in the law means basically respecting what other courts in other places decide. It's why if you get a divorce in New York, California recognizes it as legal. And normally, if a German court rules X, a US court will view it as a decided issue. So, first Motorola reviews anti-suit injunctions, going over the cases that everyone agrees in the US provide the requirements you must meet to get one, and then it tells the court why
Motorola doesn't think the stay is appropriate under the requirements for such a remedy as the anti-suit injunction affecting a foreign country:
None of the special factors that counseled in favor of anti-suit injunctions in
Seattle Totems, Gallo and Applied Medical is satisfied here. As this Court summarized these factors in Applied Medical, in evaluating whether an anti-suit injunction should issue, this Court examines: “(1) 'whether or not the parties and the issues are the same, and whether or not the first action is dispositive of the action to be enjoined'; (2) whether the foreign litigation would 'frustrate a policy of the forum issuing the injunction'; and (3) 'whether the impact on comity would be tolerable.'” 587 F.3d at 913 (quoting Gallo, 446 F.3d at 991, 994). Here, the action below and the action abroad are distinct—the former for breach of contract and the latter for patent infringement. The German action does not frustrate any U.S. policy or threaten the district court‟s ability to determine the dispute before it. And the district court‟s extraterritorial intervention in the enforcement of German patents before German courts does intolerable harm to comity. So that's the legal argument, that the judge in Washington State goofed when she accepted Microsoft's request to block the German court from enforcing its decision, namely that Microsoft is infringing Motorola's patents. Can you imagine all the FUD we'd be enjoying if it was the other way around, and Motorola had been found guilty of infringement of Microsoft's patents? FOSSPatents would be favoring the world with purple prose about stealing and piracy and disrespect for IP law blah blah all day long.
A. The U.S. Action Cannot Dispose Of The German Action
The threshold inquiry here, as in other circuits, is whether or not the parties and the issues are the same. See Quaak v. Klynveld Peat Marwick Goerdeler Bedrijfsrevisoren, 361 F.3d 11, 18 (1st Cir. 2004) (“[T]he gatekeeping inquiry is, of course, whether parallel suits involve the same parties and issues.”); Paramedics Electromedicina Comercial, Ltda v. GE Medical Sys. Info. Techs., 369 F.3d 645, 652 (2d Cir. 2004). Even so, “duplication of parties and issues alone is not sufficient to justify issuance of an antisuit injunction.” Laker Airways Ltd. v. Sabena, Belgian World Airlines, 731 F.2d 909, 928 (D.C. Cir. 1984) (footnote omitted); see also China Trade & Dev. Corp. v. M.V. Choong Yong, 837 F.2d 33, 36 (2d Cir. 1987). The anti-suit injunction here does not withstand this threshold inquiry.
While the parties are the same, the issues fundamentally differ: this case concerns whether Motorola‟s initial royalty rate offer breached its RAND assurances; the German case concerns Microsoft's current infringement of German patents as to which neither license nor payment is in place.
1. The Issues Are Not Identical
Although the two actions need not be identical, “the domestic action [must be] capable of disposing of all the issues in the foreign action.” Applied Med., 587 F.3d at 915 .... Thus, the mere fact that there is some overlap between parallel proceedings does not suffice. Cf. Laker Airways, 731 F.2d at 926-28; China Trade, 837 F.2d at 36. Considering that the German suit concerns the enforcement of German patents within Germany, this threshold requirement cannot be met.
Microsoft responded like this:
The district court’s decision was comfortably within its discretion, whether viewed as an “anti-suit” injunction or a traditional preliminary injunction. The district court found that this case will dispose of Motorola’s later-filed German action (but limited its injunction to the injunctive relief component of that action), that Motorola’s pursuit of injunctive relief in Germany frustrates policies of this jurisdiction and raises concerns of vexatious litigation and inconsistent judgments, and that any impact on comity is certainly “tolerable.” The district court further found that Microsoft made a strong showing of irreparable harm, and that both the balance of hardships and the public interest favor granting preliminary relief. The preliminary injunction should be affirmed. Get it? It wants the local, more friendly-to-Microsoft court to set the worldwide price for Motorola's patents, even though laws vary from place to place, and lay down the law for the entire world that Motorola is not allowed to seek injunctions anywhere on God's green earth. A mighty powerful district court, wouldn't you say? That would be the ideal solution from Microsoft's perspective.
This suit will dispose of Motorola’s end-run German action for two clear and independent reasons. First, Microsoft has committed to take, and is entitled to, a worldwide license to Motorola’s standard-essential patents, including those asserted in Germany. The district court’s ruling in the November trial will entirely dispose of any issue of infringement in Germany—indeed, anywhere in the world—by establishing terms for the worldwide RAND license that Motorola must offer and that Microsoft will accept. Second, because Motorola committed to license its standard-essential patents worldwide on RAND terms to all who adopt those standards, Motorola cannot obtain injunctions on those patents, and certainly not against parties like Microsoft who seek and are committed to accepting a RAND license.
From its inception, Motorola’s German suit sought to frustrate the district court’s ability to determine the consequences of Motorola’s RAND license commitments. Motorola has conceded that its RAND commitments are enforceable contracts to which Microsoft is a third- party beneficiary. Motorola’s RAND commitments are worldwide in scope, and its demand letters to Microsoft explicitly offered a worldwide license. In light of the scope of the contracts and conduct before it, the district court clearly did not abuse its discretion by preserving its jurisdiction to resolve the worldwide license issues presented by Microsoft’s complaint, including Microsoft’s entitlement to a RAND license that includes the asserted German patents and to injunctive relief barring Motorola from further action inconsistent with its contractual obligations.
Motorola frostily replied:
Plaintiff-Appellee Microsoft Corporation ("Microsoft") takes the remarkable position that, by filing a contract enforcement action under Washington state law concerning Motorola‘s standard-essential patents, it can preempt any and all patent actions Motorola might bring to enforce those patents anywhere in the world for the duration of the U.S. lawsuit, regardless of the magnitude of Microsoft‘s infringement. Getting the picture? I left out a couple of footnotes, so do read the PDFs for the details. But you get the overview, I'm sure.
Isn't it quite different from the story you've been getting from all those quotations from FOSSPatents in the media? When you read the actual court filings you can see for yourself that this is Microsoft being Microsoft. It wants to create a favorable environment for itself in the smartphone space, and it is seeking relief from a home court judge.
In accepting this argument and issuing the anti-suit injunction below, the district court asserted that a single federal district court judge and "six good citizens of the Pacific Northwest" (ER 88) hold unprecedented global patent authority. Nothing in this Court‘s decisions concerning anti-suit injunctions supports this extraordinary assertion of power to override a duly issued patent-infringement decision by a German court.
To begin with, Microsoft assumes its own victory on the merits, asserting that the district court has authority to set a worldwide RAND rate as a remedy for Motorola‘s supposed breach of a binding RAND contract with standard-setting organizations. But that premise remains controversial, to say the least. To Motorola‘s knowledge, no U.S. judge has ever set a judicially determined RAND rate for a global patent portfolio. Motorola and Microsoft will vigorously contest in the underlying contract action whether a declaration that a patent is essential to a standard is a mere commitment to negotiate in good faith for a RAND license (as Motorola contends) or a binding contract with an ambiguous price term (as Microsoft contends); whether any such commitment has been breached by Motorola‘s opening letter, which offered a RAND license but which Microsoft answered with a lawsuit rather than a counteroffer; whether the remedy for any such breach is to send the parties back to the bargaining table rather than to impose a judicially calculated, non-negotiated rate; and, if so, at what point any such order of specific performance might be justified by a breakdown in the parties‘ own negotiations. Microsoft‘s pervasive presumption of victory on these questions is unwarranted and should not distort the analysis of the erroneous anti-suit injunction entered here.
Moreover, Microsoft fails to address the numerous ways in which this case differs from the extraordinary and very different cases in which this Court has permitted anti-suit injunctions. This injunction, unlike those injunctions, is unnecessary to preserve the district court‘s jurisdiction and unnecessary to preserve Microsoft‘s claimed rights, which involve a breach-of-contract action quite different from the patent enforcement at issue in Germany.
And this injunction, unlike those injunctions, disrespects the duly issued judgment of a foreign court under foreign law, posing an intolerable conflict with international comity. The district court‘s order permits Microsoft to flout well-established German judicial procedures specifically designed to balance enforcement of German patent law with protection against anticompetitive abuse of standard-essential patents—the supposed harm of which Microsoft complains. Such an affront to the dignity of a foreign sovereign should not be permitted to stand based on the mere possibility that the district court might resolve the issues before it in a way that differs from the German court. And the availability of the Orange Book procedure in Germany forecloses any plausible basis for Microsoft to claim that it will be irreparably harmed absent the injunction. The district court‘s preliminary injunction should be vacated....
Microsoft contends repeatedly that the district court properly issued the anti-suit injunction in order to preserve its own "jurisdiction to resolve the worldwide license issues presented by Microsoft‘s complaint." Microsoft Br. 20; see id. at 21, 35, 47-48, 66-67. This argument too is meritless. To begin with, the district court‘s assertion of authority assumes the conclusion of the lawsuit—whether the court‘s authority extends to "resolving" a worldwide license is the very matter in dispute. In any event, enforcing the German judgment within Germany would not "threaten to paralyze the jurisdiction of the court" below, Laker Airways Ltd. v. Sabena, Belgian World Airlines, 731 F.2d 909, 927 (D.C. Cir. 1984); to the contrary, the district court‘s jurisdiction would remain intact even if Motorola enforces the infringement injunction in Germany....
Rather, the district court here, because it contemplates bestowing a global RAND license upon Microsoft, seeks in the meantime to protect Microsoft against any injunction Microsoft might otherwise face abroad for infringing Motorola‘s foreign patents before it acquires a license. But even if the district court and Microsoft were correct (as Motorola disputes) that the terms of a worldwide license will ultimately be set in this case, nothing in this scenario suggests that the district court stands to lose jurisdiction absent the anti-suit injunction. As Motorola has noted without refutation
(Motorola Br. 28-29), its German infringement claim can be brought only in Germany.
See Mars, Inc. v. Kabushiki–Kaisha Nippon Conlux, 24 F.3d 1368, 1372-75 (Fed. Cir.
1994) (holding that U.S. courts do not have jurisdiction to litigate foreign patents).
The district court‘s injunction therefore prevents Motorola from enforcing its right to
relief in the only place where its claim could be brought. Thus, the only court whose
jurisdiction has been imperiled is the German court, not the district court below.
Allowing Motorola to enforce the German judgment would not deprive the district
court of jurisdiction over Microsoft‘s claim. By contrast, the district court‘s anti-suit
injunction bars Motorola from enforcing, as a matter of course, the injunction the
German court adjudged appropriate to remedy Microsoft‘s continuing infringement.
III. THE ANTI-SUIT INJUNCTION IS UNNECESSARY TO PREVENT SUPPOSED RAND ABUSE BY MOTOROLA
Microsoft is no more persuasive in asserting that its district court action was necessitated by Motorola‘s "steadfast" refusal to comply with its RAND obligations, as evidenced by Motorola‘s supposedly "non-RAND demand" letters to Microsoft (Microsoft Br. 1), which it depicts as "ultimatums designed to set the stage for Motorola to file infringement lawsuits against Microsoft" (id. at 12; see also id. at 15). As Microsoft would have it, Microsoft offered to pay a fair licensing fee for its use of Motorola‘s essential patents, only to be rebuffed and bullied with potential suit.
The record belies this fiction.
For years, Microsoft manufactured and sold products that infringe Motorola‘s standard-essential patents without paying Motorola a cent for them or even seeking a license. In October 2010, Motorola sought to remedy that situation by itself reaching out to Microsoft to initiate bilateral negotiation of a RAND license. Motorola‘s opening letters to Microsoft were couched in terms of neither demand nor litigation threat; they simply offered to license Motorola‘s 802.11 and H.264 patent portfolios on standard terms and requested prompt response. See ER 375-96, ER 398-421 ("Motorola offers to license the patents on a non-discriminatory basis on reasonable terms and conditions ( 'RAND'), including a reasonable royalty of 2.25% per unit for each H.264 compliant product, subject to a grant back license under the H.264 patents of Microsoft."). In response to this offer, Microsoft failed to submit a counteroffer or otherwise engage in good-faith negotiations, but instead immediately filed the lawsuit below.
Notwithstanding the complete absence of (1) any effort by Microsoft to fulfill its obligations to license Motorola‘s patents; (2) any record of bilateral negotiations between the parties as to RAND terms; or (3) any judicial order finding breach or requiring that the parties engage in good-faith negotiations, the district court has asserted the authority to determine and impose the terms of a RAND license as to Motorola‘s global patent portfolio spanning 30 countries. See ER 16, ER 76.
The approach of the court below preempts the standard RAND process, under which rates and terms are presumptively to be determined by the market and arms-length negotiations between the parties. See ER 351 ("The detailed arrangements arising from patents (licensing, royalties, etc.) are left to the parties concerned, as these arrangements might differ from case to case."); ER 366 (RAND negotiations depend upon variable facts, including "other business dealings between the parties, such as distribution agreements, co-branding agreements, [and] cross-licenses involving other technologies.")....
Microsoft and the court below lack any authority from any court to support their startling proposition that a single, opening offer letter, without more, is enough to trigger judicial adjudication and imposition of global RAND terms.
Microsoft could avoid the injunction in Germany by just having Motorola set a price and then challenge it in the German court. If it merely wanted a price, it had a way. But it apparently doesn't like German patent law. FOSSPatents revealed that Friday [http://www.fosspatents.com/
2012/09/german-court-may-defer-to-eu-regulator.html], if I assume he is channeling overall the Microsoft-Apple legal strategy, and I do so assume, saying that in the Apple-Samsung dispute, "the Brussels-based competition authority, applying European competition rules as opposed to the uniquely SEP-abuser-friendly German Orange-Book-Standard line" might decide the battle there. So Microsoft has a way to get a price on the patents in Germany, the German Orange Book process. It just doesn't like its odds doing it that way. So this is essentially forum shopping. Microsoft would say on both sides, or really it would say only Motorola is doing it, but the swashbucklingly extreme position to me anyway would seem to be Microsoft's. I have no idea who will win, of course. I'm not in the predictions business. But at least now we can understand what it really involves, purple prose notwithstanding.
The actual picture sure is different from what I've been reading, and that is why I thought it would be useful to show you the truth -- you and historians -- so this shell game doesn't become the official account of what this dispute is really all about.