The Apple v. Motorola patent case in U. S. District Court in Madison, Wisconsin has been dismissed, with prejudice, by the Hon. Barbara B. Crabb. The trial was due to begin today. Here are the
minutes [PDF] from this morning's hearing.
John Letzing, on NASDAQ.com, has a
statement from Google:
Google Inc. said Monday a
patent-infringement lawsuit brought against the Internet search giant's
Motorola unit by rival Apple Inc.
in Wisconsin has been dismissed, adding another wrinkle to the ongoing
intellectual-property dispute between the Silicon Valley firms.
Yoo hoo, FTC. Are you watching? This is a FRAND standards-essential case brought by Apple against Google subsidiary Motorola. And it has collapsed. This is strike two for Apple. Judge Richard Posner earlier
dismissed another Apple v. Motorola litigation back in June, also with prejudice. Then he gave Apple
a spanking. Maybe it's time to realize that the FRAND allegations are spurious?
"We're pleased that the court has dismissed Apple's lawsuit with
prejudice," a Google spokeswoman said.
"Motorola has long offered licensing to our extensive patent portfolio at a
reasonable and non-discriminatory rate in line with industry standards,"
the spokeswoman continued. "We remain interested in reaching an agreement
An Apple spokeswoman did not immediately respond to a request for comment.
Jump To Comments
Update 3, Update 4]
The latest from the docket:
Filed & Entered: 11/05/2012
Apple had no statement yet to the media, but docket #499 is Apple pleading with the judge to either let it go forward or dismiss it without prejudice. Neither happened. The minutes read like this:
Minute Entry for proceedings held before District Judge Barbara B. Crabb: Hearing held on 11/5/2012. [1:57] (Court Reporter LS.) (krj)
Filed & Entered: 11/05/2012
Memorandum regarding the court's jurisdiction and the nature of any dismissal by Plaintiff Apple Inc. (krj)
PROCEEDINGS: hearing; court finds that case can not proceed to trial on remaining issue; case dismissed with prejudice.
The hearing lasted from 9 AM to 11:37. There will no doubt be a written order later, and we'll get more details. But this is an outstanding victory for Motorola.
Apple's bench memorandum, now useless in that Apple lost, was a last-minute attempt to answer Motorola's outstandingly effective
response to the judge's order asking for input regarding the decision whether or not to go forward with the trial. They noticed what I did, that it was extremely likely to be taken seriously. So Apple put on the record a memo really quickly today, presumably to try to head off total death for Apple's claims and if not, to have it in the record for the appeal. I'll work on a text version for you, but it's a TIFF, so it'll take a little longer.
Update: CNET's Greg Sandoval is crediting FOSSPatents with having the news first. However, that is inaccurate. John Letzing definitely had the story first, about an hour and forty-five minutes before FOSSPatents published. You can verify that by noticing the time stamps. Letzing's story was published at around 12:15 ET; FOSSPatents published at around 7:53 PM, presumably German time, which (as you can see on this time converter) is at almost 2 PM ET.
In any case, being accurate is better than being first, and in this instance, FOSSPatents was neither. In case you missed it, here's the nonsense that FOSSPatents was predicting [http://www.fosspatents.com/2012/10/apple-motorolas-essential-wireless.html] as recently as October 31st:
Five days ahead of a FRAND contract trial in the Western District of Wisconsin, Apple has formally declared to the court its willingness to pay Motorola Mobility for a license to its standard-essential wireless patents ("wireless" meaning cellular and WiFi standards in this context), but it will only write an immediate check to the wholly-owned Google subsidiary if the per-unit royalty does not exceed $1. If the court sets a FRAND rate at or below $1, Apple will take a license and start to pay right away. Otherwise Apple will appeal the decision and exhaust all of its legal options before Google gets anything. And here's what he wrote the day before [http://www.fosspatents.com/2012/10/pretrial-decisions-favor-apple-against.html], in an article titled "Pretrial decisions favor Apple":
Apple's lawyers made this declaration, which may be the biggest smartphone patent news on Halloween 2012, on their client's behalf in a response to a Motorola motion for clarification. That motion was filed yesterday and pointed out that Microsoft, whose FRAND contract case against Motorola will go to trial on November 13, had explicitly committed to the conclusion of a license agreement on court-ordered terms. Apple's position in the somewhat similar case in Wisconsin is basically that Microsoft's actions don't create legal obligations for others. But Apple seeks to demonstrate to the court that it is serious about resolving the wireless SEP dispute with Motorola Mobility through a license agreement on FRAND terms....
I will report on this again (or update this post) once Judge Crabb enters her decision on Motorola's motion for clarification. Whatever the decision will be, I'm convinced that Motorola is never ever going to get anything close to 2.25% of Apple's revenues. Apple's "$1 maximum" position may be justified from a FRAND point of view (I guess it is) but such a deal wouldn't give Google the strategic leverage over Apple that it hoped to get when it paid $12.5 billion for Motorola Mobility.
A few months ago, Apple valued Samsung's wireless SEPs at a rate of about half a cent per patent and unit.
Motorola Mobility is in for two rough rides next month at the upcoming FRAND
contract trials in Seattle, Washington (Microsoft) and Madison, Wisconsin
(Apple). Two days ago I reported on Judge Barbara Crabb's note to the
wholly-owned Google subsidiary that it may have to cope with overlaps between
the two trials. In
mid-August, Apple had scored a partial victory at the summary judgment stage.
And late on Monday, Judge Crabb ruled on the parties' motions in limine (motions
to exclude testimony or argument). On balance, those decisions favor Apple, but
the judge sided with Motorola on a few questions, including a legal issue
relating to the history of negotiations between the parties that Apple will have
to overcome in order to receive a court-ordered FRAND license to Motorola's
standard-essential patents (SEPs). Apple is on the winning track but it still
has some work to do.
There's plenty more where that came from, if you can't get enough of wrong predictions. Don't you get it? Google is always doomed, according to this source. Except real life doesn't turn out like that, and it never will. FOSSPatents is like the new Microsoft Get the Facts. It's who told you that Oracle was going to crush Google. You remember that trial, don't you? The one Google won so thoroughly Oracle had to pay for Google's costs?
It's also not true that up to this point, Apple was doing really well with this judge. Here's her order [PDF] denying Apple's motion to get her to rule that Motorola seeking an injunction in an Illinois case was a breach of FRAND rules:
The parties point to no other provisions in ETSI’s or IEEE’s policies relevant to Motorola’s contractual obligations.
None of these provisions expressly precludes Motorola or any patent owner from pursuing an injunction or other relief as a remedy for infringement. Nonetheless, Apple contends that the court should infer that the contracts bar injunctive relief as a matter of contract law. However, it points to no provisions in the contract from which I could draw that inference. As I explained in a previous case, “a court’s role in contract interpretation . . . is not to make contracts or to reform them, but to determine what the parties contracted to do; not necessarily what they intended to agree to, but what, in a legal sense, they did agree to, as evidenced by the language they saw fit to use.” FPL Energy Point Beach, LLC v. Energy Resource of Australia Ltd., 565 F. Supp. 2d 999, 1004 (W.D. Wis. 2008) (quoting Miller v. Miller, 67 Wis. 2d 435, 441-42, 227 N.W.2d 626, 629 (1975)). There is no language in either the ETSI or IEEE contracts suggesting that Motorola and the standards-setting organizations intended or agreed to prohibit Motorola from seeking injunctive relief. In fact, both policies are silent on the question of injunctive relief. Moreover, in light of the fact that patent owners generally have the right to seek injunctive relief both in district courts, 35 U.S.C. § 283, and in the International Trade Commission, 19 U.S.C. § 1337(d), I conclude that any contract purportedly depriving a patent owner of that right should clearly do so. This was an important loss on a key claim of Apple's, and it happened last month. By the way, the Korean decision in the Apple v. Motorola dispute from last August is now available in an English translation. Patentology reminds us of the nonsense that FOSSPatents wrote about that:
One widely-read commentator, however, was willing to infer a great deal from very little. Florian Mueller, in a FOSS Patents blog post entitled ‘Apple-Samsung ruling suggests South Korea is a FRAND rogue state’, wrote: And now this judge, Judge Crabb, has reached the exact same conclusion, that it's not balanced to ban injunctions.
A couple of court decisions announced in Seoul, South Korea, this morning indicate that South Korea has decided to become a rogue state in connection with standard-essential patents, essentially telling foreign companies that in order to sell their technology products to the country's 50-million population, they must bow to extortion by Samsung and LG.
So far, we are unaware of any credible allegations of ‘extortion’ having been made against any Korean companies, or of any diplomatic repercussions, or indeed of any impact on the US presidential race now drawing to a conclusion!
This is highly problematic and will have diplomatic repercussions. The victims of such abuse will be companies from the United States, Europe and Japan, and increasingly also Chinese companies. I don't know what Apple is going to do, but it would make sense to talk to both U.S. presidential candidates at the earliest opportunity.
However, this week we have come into possession of a full English translation of the Media Report issued by the Seoul Court on 24 August in relation to its ruling on the Samsung patents, and we have to say it makes very interesting reading, with none of the hallmarks you might expect of a document issued by a ‘rogue state’.
The translation was prepared by Korean IP law firm Lee & Ko (which acted as cousel for Samsung in the case), and was circulated to delegates who had attended the AIPPI Congress in Seoul on 20-23 October 2012. Lee & Ko have kindly provided their permission for Patentology to make the translation available in full, and it can now be viewed and/or downloaded from Google Drive. ...
The main conclusion of the Court’s reasoning was that:
In light of ETSI’s policy purpose and philosophy on standardization, a patentee has the obligation, after having provided the FRAND declaration, to negotiate in good faith with a third party requesting a license for the royalty rate under FRAND terms. On the other hand, the potential licensee or a third party concurrently owes the obligation to properly request for a license to use the standard essential patents, and negotiate with the patentee regarding the royalty rate. Prohibiting a patentee from seeking injunction against the unilateral use of the standard essential patents without requesting the patentee for a license would result in offering more protection to the potential licensee or a third party in bad faith and in violation of the fundamental nature of the patent system.
Overall, this appears to be a quite balanced perspective, and not at all the rationalisation of a ‘rogue state’. The Court seems simply to have been unwilling to allow Apple to manipulate Samsung’s FRAND obligations as leverage to achieve a favourable outcome, any more than it would have allowed an SEP-holder to abuse its monopoly power to extract an unreasonably high royalty.
Update 2: Christina Bonnington at Wired has a
statement from Motorola Mobility:
“We’re pleased that the court has dismissed Apple’s lawsuit with prejudice,” Motorola Mobility said in an emailed statement on Monday. “Motorola has long offered licensing to our extensive patent portfolio at a reasonable and non-discriminatory rate in line with industry standards. We remain interested in reaching an agreement with Apple.” Actually, she did. If you read her order from Friday, she lays it out fully. She gave the parties a chance to try to change her mind, but Apple was unable to do so. You can read all about it.
The judge, Barbara Crabb of the Western District of Wisconsin, did not provide a reason for the dismissal.
Update 3: Motorola has now filed a request to be allowed to respond to
Apple's last filing:
Filed & Entered:
11/07/2012 Here's how it reads:
Motion for Miscellaneous Relief
Docket Text: Motion for Leave to Respond re  Notice (Other) by Defendant Motorola Mobility, Inc.. Response due 11/14/2012. (Swedlow, Stephen)
MOTOROLA MOBILITY LLC’S MOTION FOR LEAVE TO RESPOND TO APPLE’S BENCH MEMORANDUM REGARDING THE COURT’S JURISDICTION AND THE NATURE OF ANY DISMISSAL
- End Update 3.]
At the conclusion of the November 5, 2012, hearing regarding the parties’ jurisdictional briefing, Apple served a bench memorandum regarding the nature of the dismissal of its case. Dkt. 499. Motorola Mobility LLC (“Motorola”) respectfully requests that this Court grant it leave to respond to Apple’s memorandum and address the arguments raised by Apple in the bench memorandum (including the nature of the dismissal) for the Court to consider in the context of the anticipated written order. Motorola will file its response by November 14, 2012.
Update 4: On November 28, the judge issued an order:
Filed & Entered: 11/28/2012
Here is her reasoning in a nutshell:
ORDER dismissing with prejudice Apple Inc.'s claims that Motorola Mobility, Inc. violated § 2 of the Sherman Act (count 5), violated Cal. Bus. & Prof. Code § 17200 (count 6), and tortiously interfered with contracts (count 13); dismissing without prejudice Apple's claims against Motorola for equitable estoppel (count 1), breach of contract (counts 2, 3 and 4) and declaratory judgment (counts 7, 11 and 12). Signed by District Judge Barbara B. Crabb on 11/28/2012. (arw)
Generally, when a court dismisses a claim without reaching the merits, it should dismiss the claim without prejudice. So she has dismissed the claims which could be dismissed on the merits with prejudice; the others she decided to dismiss without prejudice, meaning in some other lawsuit, Apple could raise the issues again. She also took seriously the claims of the parties that they were thinking about arbitration, in which case Apple might wish to raise them. Here is the Opinion and Order as text:
- End Update 4.]
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF WISCONSIN
MOTOROLA MOBILITY, INC.,
OPINION AND ORDER
In a statement from the bench on November 5, 2012, I dismissed plaintiff Apple’s Inc.’s remaining claims against defendant Motorola Mobility, Inc. In an order dated November 8, 2012, I explained in more detail the reasons for the dismissal, but I reserved a decision on the form of the dismissal and gave the parties an opportunity to brief the issue. Both parties have responded, with Apple arguing that its claims should be dismissed without prejudice and Motorola arguing the opposite.
I conclude that Apple’s claims that were dismissed at the summary judgment stage must be dismissed with prejudice. Those include Apple’s claims that Motorola violated § 2 of the Sherman Act (count 5), violated Cal. Bus. & Prof. Code § 17200 (count 6), and tortiously interfered with contracts (count 13). Order, dkt. #194 at 47. Those claims were dismissed on the merits and Apple has made no argument about why they should not be dismissed with prejudice. Turek v. General Mills, Inc., 662 F.3d 423, 425 (7th Cir. 2011)
(claim dismissed on merits should be dismissed with prejudice).
This leaves Apple’s claims for equitable estoppel (count 1); breach of contract (counts
2, 3, 4); and declaratory judgment (counts 7, 11, 12). As relief for those claims, Apple was seeking a declaration that Motorola had breached contracts with standards setting organizations and a determination by the court of a specific FRAND rate for Motorola’s standards-essential patents. Additionally, Apple had requested that the court declare Motorola’s ‘898 patent invalid and unenforceable as a result of Motorola’s failure to timely disclose it to standards setting organizations. I dismissed those claims because Apple had failed to show that its requests for extraordinary injunctive relief and discretionary declaratory relief were warranted under the circumstances. After reviewing the parties’ arguments on the issue, I conclude that Apple’s declaratory judgment, equitable estoppel and breach of contract claims must be dismissed without prejudice.
Generally, when a court dismisses a claim without reaching the merits, it should dismiss the claim without prejudice. Murray v. Conseco, Inc., 467 F.3d 602, 605 (7th Cir. 2006) (vacating district court’s dismissal with prejudice for lack of subject matter jurisdiction and remanding with instructions to dismiss complaint without prejudice because “[a] dismissal for lack of subject matter jurisdiction is not on the merits”). Thus, when courts decline to exercise discretionary jurisdiction or reach the merits of a declaratory judgment claim, they usually dismiss the claim without prejudice. E.g., International Harvester Co. v. Deere & Co., 623 F.2d 1207, 1218 (7th Cir. 1980) (explaining that claim for declaratory relief should have been dismissed without prejudice because court lacked subject matter
jurisdiction over claim, and even if jurisdiction existed, requested declaratory relief was not appropriate “at [the] time”). See also Ven-Fuel, Inc. v. Department of the Treasury, 673 F.2d 1194, 1195 (11th Cir. 1982) (modifying district court’s dismissal with prejudice of declaratory judgment action to dismissal without prejudice because district court declined to reach merits); Continental Casualty Co. v. Duckson, 826 F. Supp. 2d 1086, 1103 (N.D. Ill. 2011) (dismissing declaratory judgment claim without prejudice because claim was premature); Hickman v. Wells Fargo Bank N.A., 683 F. Supp. 2d 779, 790 (N.D. Ill. 2010) (dismissing declaratory judgment claim without prejudice because plaintiff failed to explain why declaration was necessary or appropriate).
As I explained in the orders entered November 2, dkt. #487, and November 8, dkt. #503, I dismissed Apple’s claims for declaratory relief because the decision whether to grant declaratory relief is discretionary, 28 U.S.C. § 2201(a), and it is inappropriate to issue declaratory judgment if “such a judgment would have no practical effect.” Dkt. #487 at 5 (citing Apple, Inc. v. Motorola, Inc., Case No. 1:11-CV-08540, 2012 WL 2376664, *23 (N.D. Ill. June 22, 2012). See also International Harvester Co., 623 F.2d at 1218 (“A declaratory judgment should issue only when it will serve a useful purpose.”). With respect to Apple’s request for declaratory relief related to Motorola’s ‘898 patent, Apple had not shown that the declaration was necessary or appropriate, in light of Judge Posner’s dismissal of Motorola’s patent infringement claims and Apple’s alleged harm. With respect to Apple’s declaratory judgment claim regarding licensing, I concluded that Apple had failed to show that its requested declaration would serve any purpose other than providing Apple a ceiling
on the potential license rate that it could use for negotiating purposes. Apple was requesting that the court declare that Motorola breached its contracts and “declare” a FRAND rate for Motorola’s patents, but Apple had refused to be bound by the rate chosen by the court. Instead, the rate simply would clarify whether Motorola’s license offers to Apple had been FRAND and if not, what the rate should have been. Thus, if Apple succeeded in establishing that Motorola breached its contracts but then refused to accept the rate chosen by the court, further litigation likely would be necessary to resolve the parties’ licensing and infringement disputes. Even under Apple’s modified trial proposals in which Apple agreed to be bound by a FRAND rate chosen by the court, there would be numerous issues remaining related to the parties’ licensing disputes. Thus, Apple’s requested declarations were unlikely to “serve a useful purpose.”
Under different circumstances, it may be appropriate for a court to entertain Apple’s requests for declaratory relief and consider the merits of Apple’s claims. International Harvester Co., 623 F.2d at 1218 (explaining that because dismissal was without prejudice, plaintiff was “free to seek a declaratory judgment in the future . . . when its need for relief is more compelling”). For example, it may be appropriate for a court to consider Apple’s arguments in the context of a patent infringement suit. However, under the circumstances presented, it was inappropriate to reach the merits of Apple’s claims for declaratory judgment, so I exercised the court’s discretion in dismissing the claims. Because I did not reach the merits of Apple’s declaratory judgment claims, I will dismiss them without prejudice.
With respect to Apple’s claims for which it sought injunctive relief, I dismissed those claims because Apple failed to show that the court should order the extraordinary relief of specific performance. As I explained in the November 2 and November 8 orders, Apple’s request for injunctive relief required it to satisfy the standards set forth in eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 391 (2006). Apple failed to satisfy the eBay standards because it did not show that it had suffered irreparable harm, that money damages would be inadequate or that the public interest favored granting an injunction. Dkt. #487 at 4-5.
Although the legal basis for dismissing Apple’s claims for injunctive relief was slightly different from the legal basis for dismissing the claims for declaratory judgment (Apple was not required to satisfy the eBay standards on its declaratory judgment claims), I dismissed the claims for injunctive relief for many of the reasons I dismissed the declaratory judgment claims. In particular, Apple failed to show that its requested injunction would serve any purpose other than providing Apple a bargaining chip in future negotiations or litigation. Kartman v. State Farm Mutual Automobile Insurance Co., 634 F.3d 883, 893 (7th Cir. 2011) (considering “as a practical matter, . . . what purpose would be served by” proposed injunction). As explained above, I am dismissing Apple’s claim for declaratory relief without prejudice. I conclude that because Apple’s claims for declaratory and injunctive relief are based on the same facts and arguments, rely on the same underlying theories of liability (breach of contract and equitable estoppel), were dismissed for similar reasons, and ultimately, seek similar forms of relief, Apple’s claims for which it sought injunctive relief should also be dismissed without prejudice.
The parties suggest in their briefs that they are considering taking their disputes to arbitration, though they have disagreements about the scope and form of the arbitration. In addition to the explanations provided above, the possibility that this dispute can be resolved through binding arbitration is another reason why I conclude that Apple’s breach of contract, equitable estoppel and declaratory judgment claims should be dismissed without prejudice. A dismissal with prejudice could inhibit the parties’ efforts at resolving their disputes through binding arbitration.
IT IS ORDERED that plaintiff Apple Inc.’s claims that defendant Motorola Mobility,
Inc. violated § 2 of the Sherman Act (count 5), violated Cal. Bus. & Prof. Code § 17200 (count 6), and tortiously interfered with contracts (count 13) are DISMISSED WITH PREJUDICE. Apple’s claims against Motorola for equitable estoppel (count 1), breach of contract (counts 2, 3, 4), and declaratory judgment (counts 7, 11, 12), are DISMISSED WITHOUT PREJUDICE. The clerk of court is directed to enter judgment accordingly and close this case.
Entered this 28th day of November, 2012.
BY THE COURT:
BARBARA B. CRABB
Here is Apple's bench memorandum, its so-far failed attempt to turn the tide [eventually partly successful, see Update 4]:
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF WISCONSIN
MOTOROLA MOBILITY, INC.
Case No. 11-CV-178-bbc
Hon. Barbara B. Crabb
APPLE'S BENCH MEMORANDUM REGARDING THE COURT'S JURISDICTION
In the final pretrial conference and in its November 2 Order, the Court questioned whether this case should be tried. The Court's question was premised on concerns regarding whether it would be an appropriate exercise of discretion to decide Apple's claims for equitable relief. Motorola repackaged that concern as a lengthy argument in its November 4 response to the November 2 Order and also argued that the Court lacks jurisdiction to hear Apple's claims. Apple's submission set forth a proposal whereby both parties would be bound to accept a FRAND rate set by the Court for a cross-license to each other's declared standards-essential portfolios. Apple submits this bench memorandum to address Motorola's argument that the Court lacks jurisdiction to hear Motorola's claims.
AND THE NATURE OF ANY DISMISSAL
First, the Court has jurisdiction to hear Apple's claims both under Apple's proposal that the parties be bound by the FRAND rate and under Apple's previous conception of the case. Second, Apple requests that if the Court disagrees with Apple and dismisses the case, that it do so without prejudice. This is what the law requires and would ensure that Apple may assert its
SSO-based defenses in Motorola's infringement suits against Apple, which Motorola argues is the appropriate form for those questions to be decided.
Motorola's Arguments Are Moot In Light of Apple's November 4 Proposals
Motorola's jurisdictional arguments are all based on the premise that Apple is seeking an order that is binding only on Motorola and would permit Apple to "bargain down." Dkt. 496 at 2. Apple's proposals in its November 4 filing negate this premise and moot any argument that Apple seeks an advisory opinion. Apple has now proposed two alternatives whereby both Apple and Motorola would be bound to license each other's standards-essential patents at a FRAND rate, fully resolving their dispute. Presumably, Motorola will agree to one of those proposals, since it "would welcome a final license agreement with Apple and a process to make that happen," which is what Apple has proposed. Dkt. No. 496 at 1.
If Motorola Declines to Be Bound Under Apple's Proposals, the Court Has Jurisdiction to Order Motorola to Offer Apple a FRAND License
If, however, Motorola declines to be bound by an order requiring it to license its patents to Apple and to pay for a cross-license to Apple's patents, this Court would still have jurisdiction to order Motorola to offer Apple a FRAND license to Motorola's patents. Motorola's arguments to the contrary are based on a basic misunderstanding of the contracts that are at issue in this breach of contract case.
Motorola argues that "[t]his Court lacks jurisdiction to ... set a rate that Apple is not bound to accept," Dkt. 496 at 5, because that relief would not provide "ultimate redress" by "establish[ing] . . . an actual FRAND license," id. at 8. Motorola's argument is based on the misconception that Apple is seeking specific performance of a future licensing agreement
between Apple and Motorola. That is incorrect. The contracts on which Apple has sued, and on which it seeks specific performance are Motorola's contracts with IEEE and ETSI. Those contracts only obligate Motorola to offer a license to its patents on FRAND terms. Motorola has already obtained the benefit of that bargain: through its participation in SSOs, Motorola has successfully advocated for the adoption of its technical proposals and obtained the intellectual property rights that flow from such adoption. Apple is seeking specific performance to enforce the second half of that bargain -- offering a FRAND license to the patents thus obtained. These contracts at issue do not purport to require Apple (or anyone else) to accept Motorola's offers. Thus, the "controversy" presented to the Court by Apple's FRAND claims -- Motorola's breach of its SSO contracts -- would be fully resolved by an order requiring Motorola to perform those contracts by offering a FRAND license.
Motorola's IEEE FRAND obligation, set forth in its March 1, 1994 "blanket" letter of assurance, states that "Motorola agrees to license [standards-essential] patents on a non-discriminatory basis offering fair and commercially reasonable terms." Trial Ex. 14 (emphasis added). Motorola's December 20, 2002 ETSI declaration of intent to offer a FRAND license to IPR including the '559 and '697 patents states that "Motorola hereby declares that it is prepared to grant irrevocable licenses on fair, reasonable and non-discriminatory terms and conditions udner such IPRs." Trial Ex. 15 (emphasis added). Motorola's ETSI declaration relating to the '898 patent includes the same statement. See Trial Ex. 16.
The Motorola SSO contracts that Apple seeks to enforce are thus analogous to option contracts: Motorola promised the SSOs that in exchange for the benefit of participating in the standards process, it would give third parties the option to license its patents on FRAND terms. Cf. Rest. 2d Contracts § 25, Illus. 1 ("A promises B under seal or in return for $100 paid or
promised by B that A will sell B 100 shares of stock in a specified corporation for $5,000 at any time within thirty days that B selects."). Moreover, as with options contracts, Motorola's obligation to offer a FRAND license was "irrevocable." Trial Exs. 15, 16; see Rest. 2d Contracts §25, comment d("The principal legal consequence of an option contract is that stated in this
Section: it limits the promisor's power to revoke an offer."). It is a non-controversial proposition that options contracts are enforceable. See, e.g., American Land Holdings of Indiana, LLC v. Jobe, 604 F.3d 451, 459 (7th Cir. 2010)(Posner, J.) ("The deed we have said permits the purchase of the surface only as may be necessary for mining operations underground. The grant of that option is the grant of an appurtenant right that Peabody can exercise at any time.") (emphasis in original).
Accordingly, an order determining the FRAND rate for Motorola's patents and requiring Motorola to offer Apple a licence at that rate would not be an advisory opinion, because it would have the binding force of law, resolving the parties' dispute and requiring Motorola to fulfill its contractual obligation to offer Apple (indeed, anyone) a FRAND license. The contracts in question will have been fully performed once Motorola makes a FRAND offer; Motorola has pointed to nothing in the contracts that require Apple to accept an offer to license Motorola's patents. Accordingly, the binding force of the Court's order would not be dependent on future action by Apple.1
In addition, the harm that Apple has sued to redress is the harm of not receiving a FRAND offer from Motorola. The order Apple is requesting would redress this harm because it would give Apple the power to accept Motorola's offer -- a power that Apple currently lacks because of Motorola's breach.2
Finally, the case is ripe for adjudication because Motorola has refused to offer Apple a FRAND license, the parties' negotiations are at an impasse, and Motorola has sued Apple for patent infringement.
Motorola argues that Apple's FRAND and untimely disclosure claims would be more appropriately raised as affirmative defenses to future patent infringement lawsuits. If the Court decides to dismiss Apple's claims, Apple seeks to ensure that such a dismissal may not operate as res judicata to bar Apple doing just that -- raising its theories as affirmative defenses or counterclaims in future cases. Specifically, Apple requests that if the Court dismisses Apple's claims, it do so without prejudice.
Where a court's dismissal of an action does not reach the merits of a claim, that dismissal must be without prejudice. See, e.g., Rambeau v. Dow, 553 F.2d 32, 35 (7th Cir. 1977) ("Inasmuch as the court was unable to reach the merits, however, the order should be modified to make it without prejudice."); Michigan Surgery Inv., LLC v. Arman, 627 F.3d 572, 576-77 (6th Cir. 2010) ("Dismissals of actions that do not reach the merits of a claim, such as dismissals for lack of jurisdiction, ordinarily are without prejudice.") (citation omitted).
Specifically, "dismissal for want of jurisdiction, not being an adjudication on the merits, is without prejudice, which is to say that it doesn't foreclose, by operation of the doctrine of res judicata, a future litigation to decide the merits." In re IFC Credit Corp., 663 F.3d 315, 320 (7th Cir. 2011); see also Sachs v. Ohio Not. Life Ins. Co., 148 F2d 128, 132 (7th Cir. 1945) ("We think no authority need be cited for the proposition that a ruling is not res adjudicata when made in a case subsequently dismissed for want of jurisdiction."); Fed. R. Civ. P. 41(b) (expressly directing that dismissals for lack of prejudice are not adjudications on the merits).
In addition, when a district court exercises its discretion to decline to entertain a declaratory judgment action on the merits, the court's dismissal must be without prejudice. See Ven-Fuel, Inc. v. Department of the Treasury, 673 F.2d 1194, 1195 (11th Cir. 1982) (modifying district court's dismissal with prejudice of a declaratory judgment action to a dismissal without prejudice because the district court declined to reach the merits); Ohio Nat'l Life Assurance Corp. v. Riley-Hagan, No. H-08-2285, 2008 WL 5158089, at *9 (S.D. Tex. Dec. 9, 2008) ("[N]umerous courts declining to decide declaratory judgment actions under Brillhart and Wilton [absention] have instead elected to dismiss without prejudice.") (citing numerous cases) (emphasis omitted).
For the foregoing reasons, Apple requests that the trial in this matter go forward or, in the alternative, that any dismissal be without prejudice.
Dated: November 5, 2012
/s/ Samuel F. Ernst
Robert D. Fram (CA Bar No. 126750)
Christine Saunders Haskett (CA Bar No. 188053
Samuel F. Ernst (CA Bar No. 223963)
Nathan E. Shafroth (CA Bar No. 232505)
Danielle L. Goldstein (CA Bar No. 257486)
COVINGTON & BURLING LLP
[address, phone, fax]
Jason C. Raofield (DC Bar No. 463877)
Richard Anthony Lopez (DC Bar No. 995719)
Matthew John Connolly (DC Bar No. 997950)
COVINGTON & BURLING LLP
[address, phone, fax]
Matthew D. Powers
TENSEGRITY LAW GROUP, LLP
[address, phone, fax]
CETRA LAW FIRM LLC
Attorneys for Plaintiff Apple Inc.
1 This case is therefore unlike Chicago & Southern Air Lines, Inc. v. Waterman S.S. Corp., 333 U.S. 103 (1948), and the other advisory opinion cases cited in Motorola's November 4 submission. In Chicago & Southern Air Lines, the Court held that an administrative regulation was not a final reviewable decision having the force of law because it had not been reviewed by the President. Id. at 113. Here, the Court's order would have the force of law, requiring Motorola to fulfill its obligation to offer the FRAND license.
2 Accordingly, this case is not like Microwave Acquisition Corp. v. FCC, 145 F.3d 1410 (D.C. Cir. 1998) and the other redressability cases cited in Motorola's November 4 submission. In Microwave the plaintiff sued the FCC to challenging an order approving the transfer of one company to another. See id. at 1411. The plaintiff's injury of not being able to approve the acquisition, it would not result in the transfer of the company to the plaintiff. Here, the Court's order would result in Motorola offering Apple the FRAND license to which it is entitled.
3 This case is therefore unlike Clinton v. Acequia, Inc., 94 F.3d 568 (9th Cir. 1996), and the other ripeness cases cited in Motorola's November 4 submission. In Clinton, the parties had a contract requiring the defendant to liquidate a corporation by 1997. See id. at 572. Plaintiff sued to enforce the contract because the liquidation had not yet commenced, but because it was only 1996, the case was not ripe for adjudication. See id. Here, Motorola's contactual obligations adhered long ago, when it agreed to be bound by the SSO policies.