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Report from the Microsoft v. Motorola Hearing in Seattle ~pj Updated
Wednesday, July 31 2013 @ 10:24 PM EDT

There was a hearing today in US District Court Seattle before the Hon. James L. Robart, the presiding judge in Microsoft v. Motorola. We had two volunteers there, and I have our first report for you.

This was the hearing on their RAND dispute building up to the second part of the trial in this litigation which is set to begin on August 26th, and, as is typical before a trial, both sides brought motions for summary judgment or partial summary judgment. There was a trial already, part one, with the judge only, no jury, and he set a RAND rate Microsoft should pay to Motorola, a very low rate. But there is a second trial coming up in August, this time with a jury, on whether or not Motorola breached its RAND obligations, which is what Microsoft claims, and if so, whether Microsoft should receive damages and attorneys fees. Motorola filed a motion for partial summary judgment [PDF] on those issues. Here's Microsoft's opposition [PDF].

Microsoft also filed its motion [PDF] asking for partial summary judgment on breach of contract and summary judgment on Motorola's 3rd, 4th, 5th, 7th, 8th and 9th affirmative defenses and its second counterclaim. You can read about the affirmative defenses and counterclaim beginning on page 21. And this is Motorola's response in opposition to Microsoft's motion.

That's the long version of what was the subject matter at the hearing, or the starting point. But here's the simple overview. Microsoft is claiming Motorola asked for too high a royalty in its opening offer of its RAND patents and that seeking an injunction for a RAND patent is a breach of contract; and Motorola claims Microsoft sucker punched them by asking for an offer and when it got one, immediately suing instead of negotiating an agreed-upon price. The judge also asked the parties to brief a separate question on what are the proper responsibilities with respect to RAND patents. What do "good faith" and "fair dealing" mean in that context? Here's where you can find both sides' briefs as text, Microsoft's and Motorola's [PDFs], and many of the points in those briefs were touched on in the hearing today.

Jump To Comments

Update

It's in a court in Microsoft's back yard, the US District Court for Western Washington, in front of a judge who has so far shown a strong willingness to agree with Microsoft whenever possible. Microsoft hoped that there would be no jury at all, in fact, and who can blame them, considering they seem to have this judge's ear. But both sides hope to win something, so the case gets smaller and easier to try.

Complicating matters for Microsoft is that the ITC recently ruled that RAND patent owners are allowed to ask for injunctions against unwilling licensees, and ruling against Apple and for Samsung, with Apple making similar arguments that Microsoft is making here in Seattle, and that puts Microsoft on the defensive a bit, even in a tilted courtroom, and of course Motorola brought the ruling [PDF] to the court's attention.

To understand part of what our reporter's notes tell us, you need to also know that originally Microsoft was asking only for attorneys fees as damages for Motorola's alleged breach of contract. But later, after Motorola successfully sought and won an injunction in Germany against Microsoft, Microsoft brought the matter to this Seattle judge, got him to put that injunction in Germany on hold, and then Microsoft decided to seek more than $11 million in damages for having to move its distribution facilities from Germany to the Netherlands, purportedly because of the looming injunction in Germany. It made the move in 2012 and only added the costs to the case in 2013, a full year later, as Motorola outlines for the court in this letter [PDF]. Here is some background on the whole Germany saga, which is ongoing, as you can see in this letter [PDF] to the court from Microsoft, in which it defends its request for reimbursement of the expense of relocation.

There is also a dispute about what experts can say at the trial. At the hearing, according to a notation on the docket by the clerk, Microsoft handed the judge the following:

I wouldn't exactly call that "notice", to just show up in court and hand it to Motorola on the spot. Remember when SCO would do that in bankruptcy court? Sometimes it worked, too, which is probably why lawyers do such things. The exhibits are lists of all the reasons Microsoft argues that Motorola's expert shouldn't be allowed to testify that a RAND licensing commitment only requires negotiations and another expert should not be allowed to say that RAND licensing does not require consideration of stacking or give a conclusion that Motorola's conduct was acting in good faith or that opening offers need not be within a RAND range to be in good faith or that Microsoft wasn't due any damages.

Lots going on, huh? And there is even more, but this is enough for you to understand the eyewitness reports. Oh, one more thing: they mention Marvell at the hearing, and you can read about that wrinkle in the case in Motorola's motion for partial summary judgment [PDF].

Whew. I think that's everything. If I have forgotten something, I'll see in your comments and try to fill in the blanks. So, with all that, here finally is our report about the day's events:

Prior to the trial, judge brings out new employee, introduces him to counsel on Motorola side but not Microsoft side.

Counsel appearances--6 attorneys for each side.

Mr. Arthur Harrigan arguing for Microsoft.

Ms. Kathleen Sullivan arguing for Motorola.

Motions for damages seeking injunctive relief, a motion mentioning Marvell, Motorola's affirmative defenses. 20 min for each side.

Microsoft starts--states that blatantly unreasonable offer violates the RAND covenant. States that there was an objective basis for finding the offer to be unreasonable. References Ninth Circuit interlocutory order--judge questions if that ruling was binding. Judge asks if he should focus on one fact -- initial offer -- Motorola made versus the entire picture. Discussion about that. Microsoft argues about percent of product price being unreasonable, referencing Marvell issue with Audi. Mentions other Motorola royalty decisions that resulted in lower rates than their offer to Microsoft.

Motorola follows. Need to look at the context, not just the offer made initially. Says there is no case law that any opening offer can be considered bad faith--no bright line there.

Need to go back to 1 Oct. vs. 20 Oct., when the timeline started. Microsoft had sued Motorola for their patents. Judge states Motorola conceded that there could be a blatantly unreasonable offer -- counsel does not agree, reads from earlier transcript. Judge recalls differently.

Motorola states that non-response to initial offer is atypical -- most companies start bargaining once an offer is made instead of leaping into a lawsuit. Says again there is no categorical rule that any opening offer can be bad faith -- context is essential. Summation of context that Microsoft did not respond in good faith and leaped to the lawsuit and that this is atypical for the industry. Judge later says “I get it”, indicating he felt this point seemed to be belabored.

Microsoft's response. Argues that lawsuit response was a reasonable step to take.

5 minute recess.

Motorola's motions discussed.

Streamlining of case -- trying to make the case easier for judge and jury. Three theories of breach. Injunction theory: the mere act of seeking an injunction does not equal bad faith. Quotes judge's prior decision. Injunctions are not categorically barred. Motorola asked for injunctions only after Microsoft sued. Judge asks if Motorola asked for ITC injunction in Germany after Microsoft indicated it would be a willing licensee.

Judge asks when duty of good faith bargaining begins and ends. Motorola says it is ongoing. But each breach complaint is pinned to a specific date -- not tied to the progress of the litigation(s). Mentions FTC order re Google acquisition of Motorola. FTC did not say that *prior* injunctive relief requests had to be dropped.

Judge asks for timeline; both counsels will work to agree on one and send it to him.

Discusses Marvell. Motorola told Marvell they did not need a license -- Microsoft disagrees. Looks for reference to support this. Cross-license was discussed, but Marvell did not respond to Motorola.

MPEG LA discussed -- Motorola says it is not relevant. Google is not a party and Motorola is not involved. Motorola made an offer and Microsoft refused. Noerr Pennington case, extending state law claims. Attorneys fees should not be part of patent suit damages. (ref: Judge Crabb decision.) Judge makes “pot calling the kettle black” comment.

Microsoft response – (not Mr. Harrigan)--accuses Motorola of hold-up. States they want to use Marvell and MPEG LA as background -- not as a case to litigate. Judge asks what stops them from bringing in new cases as evidence -- events even between now and the trial.

Discusses timeline of suits. ITC suit submitted after Microsoft said they would accept the court's RAND rate for the license. Says Marvell is relevant because Motorola's license offer specifically excluded indemnifying Microsoft -- which is why Marvell did not pursue the licensing. For MPEG LA, Microsoft says its a question of law if Google had to offer their SEPs (standard-essential patents) on RAND rates. Judge says there are too many rabbit holes and this is one too many. Mr. Harrigan speaks, arguing for attorneys fees to be included. Many cases quoted. Motorola rebuts those cases.

Judge asks younger lawyers to speak (did not get names):

Microsoft -- about high offer being the same as refusal to license.

Motorola-- MPEG LA agreement preceded Microsoft relocation action [about Microsoft relocating some facility in response to Motorola's Germany injunction].

Judge discussion: Discusses jury questionnaire. Judge says it's okay to create one, but it must be brief. Discusses jury instructions.

Judge's observations. Trial on 26th. 16 hours per side. Includes jury selection, etc. Discussion about court ruling on testimony. Some testimony was considered protected by client-attorney privilege. Judge did not like Microsoft's counsel using that as “sword and shield” and was disappointed that this testimony was not provided more openly.

Here's the clerk's notation about the hearing, as well as the Daubert hearing the day before:
808 - Filed: 07/30/2013; Entered: 07/31/2013
Motion Hearing -- MINUTE ENTRY for proceedings held before Judge James L. Robart- Dep Clerk: Casey Condon; Pla Counsel: Arthur Harrigan, Christopher Wion, David Pritikin, Richard Cederoth, Andrew Culbert; Def Counsel: William Price, Kathleen Sullivan, Philip McCune, Ralph Palumbo (by telephone); CR: Nancy Bauer; Daubert Hearing held on 7/30/2013. (CC)

809 - Filed & Entered:   07/31/2013
Motion Hearing: MINUTE ENTRY for proceedings held before Judge James L. Robart- Dep Clerk: Casey Condon; Pla Counsel: Arthur Harrigan, Christopher Wion, David Pritikin, Richard Cederoth, Andrew Culbert, Nathaniel Love; Def Counsel: Kathleen Sullivan, William Price, Philip McCune, Andrea Roberts, Cheryl Berry, Ellyde Thompson, Ralph Palumbo (by telephone); CR: Nancy Bauer; Motion Hearing held on 7/31/2013. The court hears argument from counsel on pending motions. The court takes the matters under advisement. The court will allow juror questionnaires to be completed the first day of trial. Trial to begin Monday, August 26, 2013 at 9:00 a.m. Each side will be allowed 16 hours of trial time. (CC)

And to fill in any gaps, here's Motorola's introductory materials in its motion for summary judgment:
I. PRELIMINARY STATEMENT

Motorola is entitled to summary judgment on a number of issues that will significantly narrow this case for trial. This case arose out of communications between the parties in 2010. Microsoft filed its first lawsuit in October 1, 2010, seeking an exclusion order from the ITC to prevent the importation of Motorola smartphones for alleged patent infringement. Then, Microsoft requested that Motorola put its patents on the table, resulting in Motorola sending license offers for its 802.11 and H.264 SEP portfolios on October 21 and 29, 2010, including an offered rate of 2.25%. In response to those letters, instead of counter-offering, Microsoft filed the current breach of contract lawsuit on November 9, 2010, alleging that the letters sought unreasonably high royalty rates in violation of RAND commitments. After Microsoft filed the current lawsuit—the third it filed against Motorola— Motorola sued for patent infringement in various jurisdictions, including Germany. In its pleadings, Motorola sought—but never in fact enforced—injunctions against Microsoft for patent infringement.

The question remaining for trial in this action is whether there was a breach of contract. While Motorola reserves its appellate rights regarding the nature and scope of Motorola’s commitments to the IEEE and ITU and Microsoft’s right to enforce those commitments, Motorola assumes for the purposes of this motion that binding contracts between Motorola and the IEEE and Motorola and the ITU exist and that Microsoft is a third party beneficiary of those contracts. In discovery, Microsoft identified four theories of breach. Microsoft appears to have abandoned two of those theories, which relate to Marvell and MPEG LA, because none of its experts opined on those theories. In any event, Motorola is entitled to summary judgment on each of those theories because Microsoft cannot prove each of the elements of a breach of contract for these two theories. Of the two breach theories that remain, Motorola is also entitled to summary judgment that it did not breach its obligations to the IEEE and ITU by seeking injunctive relief for infringement of its essential patents because Microsoft similarly cannot prove the elements of its claims.

In discovery, Microsoft also identified only two theories of damages, and both theories are fatally flawed. Microsoft contends that it was damaged because it incurred attorney fees and litigation costs defending against Motorola’s patent infringement cases. Microsoft further contends that it relocated its European distribution facility in preparation for complying with an injunction against infringing Motorola’s essential patents in Germany. Both theories arise out of Motorola’s enforcement of its patents and thus are barred by the Noerr-Pennington doctrine.

Microsoft’s attorney-fee and litigation-cost damages theory also runs afoul of the American Rule, under which parties to litigation pay for their own attorneys. Microsoft cannot show that any exception to the American Rule is met here. Thus, Motorola is entitled to partial summary judgment on Microsoft’s attorney-fee and litigation-costs damages claim.

And here's Microsoft's opposition, the introduction:
INTRODUCTION

Motorola urges scattered arguments targeting selected issues and evidence it hopes to eliminate from the trial. For example, Motorola would prefer that the jury not consider Motorola’s relentless pursuit of injunctions in derogation of its RAND licensing commitments—conduct which already incurred two injunctions from this Court, and antitrust scrutiny from the FTC and the European Commission. But Microsoft has provided ample legal and factual support for its breach theories premised on Motorola’s lawsuits on its SEPs. Motorola’s flawed argument that the Noerr-Pennington doctrine bars these theories was already properly rejected by Judge Crabb in the Western District of Wisconsin, where Motorola first advanced it, a holding that Motorola conspicuously neglects to mention.

Motorola’s invocation of the default American fee-shifting rule to cut back Microsoft’s damages claim is also misguided: The rule is irrelevant where the fees sought were incurred in other actions, and the portion of fees sought that were incurred here are subject to a specific exception. Motorola’s argument, if accepted, would amount to immunity for SEP holders for withholding RAND licenses and instead attempting to enjoin standard implementers. Motorola would also prefer that the jury not hear how it treated Marvell, or its evasion of the grant-back obligations of the Google-MPEG LA license, but the Court has already ruled that Microsoft can argue that these instances of conduct support its overall theory of breach, and they will be part of the trial. Motorola’s summary judgment motion should be denied in its entirety.

As for Microsoft's motion, here's the introductory materials:
I. INTRODUCTION

As a pretext for suing Microsoft for infringement of patents Motorola had committed to license to all on RAND terms and conditions, Motorola sent two demand letters to Microsoft in October 2010. Motorola’s demands, made with 20-day ultimatums, were so over-reaching that no rational company could ever have accepted them or even viewed them as legitimate offers. Having dispensed with the formality of an “offer,” once the 20 days were up Motorola filed lawsuits against Microsoft on a subset of Motorola’s declared standard-essential patents, seeking injunctions aimed at giving Motorola enormous leverage in other patent disputes with Microsoft. This is the essence of hold up, and a flagrant breach of the RAND licensing commitments made by Motorola to the pertinent standard setting organizations.

As the Court’s Findings of Fact and Conclusions of Law confirm, the demands Motorola made in October 2010 were astronomically higher than an actual RAND royalty for Motorola’s standard-essential patents. Instead of granting a license on RAND terms, Motorola breached its RAND licensing commitments. Motorola’s conduct forced Microsoft to defend itself against litigation that never should have been brought, and to incur legal fees and significant business expenditures to protect Microsoft’s standard-compliant products from being improperly shut out of the market.

Motorola’s conduct (the demand letters, suing and seeking injunctions on standard-essential patents, discriminating against Microsoft’s supplier Marvell) has breached its RAND commitments on multiple grounds, but this motion is directed at two specific bases of breach most appropriate for summary judgment:

  • Motorola breached the duty of good faith and fair dealing by engaging in commercially unreasonable conduct.

  • Motorola breached the duty of good faith and fair dealing by engaging in conduct that frustrated the purpose of its RAND licensing commitments.

In March 2012, Microsoft moved for summary judgment that Motorola had breached its RAND licensing commitments. (Dkt. No. 236.) The Court denied the motion because it then lacked a true RAND royalty to compare to Motorola’s demands. (Dkt. 335 at 25–26.) Now that the Court, with the agreement of the parties, has determined the RAND royalties due from Microsoft for a license to Motorola’s declared standard essential patents, it is apparent that Motorola’s October 2010 demands were so unreasonable (certainly blatantly unreasonable) as to breach the duty of good faith and fair dealing.

The remaining issues that caused the Court to hesitate to grant Microsoft summary judgment previously have likewise been resolved. First, the Court found that “a determination of the relevance of Motorola’s prior license agreements” was “inherently fact intensive” (Dkt. No. 335 at 26), but the Court completed that inquiry in the RAND royalty trial and found those agreements irrelevant (Dkt. No. 673, April 19, 2013 Findings of Fact and Conclusions of Law (“FFCL”) ¶¶ 420, 435, 443, 445, 454). Second, the Court perceived fact issues in “Microsoft’s assertion that Motorola’s 802.11 and H.264 Standard essential patent portfolios cover only a minimal part of the technology involved in the 802.11 and H.264 Standards” (Dkt. No. 335 at 27), but the Court made precisely that finding following the RAND royalty trial (FFCL ¶¶ 289,299, 533, 575, 576).

Finally, the Court noted an open question as to whether Motorola’s demand letters “were sent in bad faith.” (Dkt. No. 335 at 27.) As explained in Microsoft’s July 1 brief concerning the duty of good faith and fair dealing, while a finding that Motorola acted in bad faith is sufficient to establish a breach of the duty, it is not necessary to establish breach, because either (1) objectively commercially unreasonable (or blatantly unreasonable) conduct, or (2) conduct that frustrates the purposes of the contract, also gives rise to liability for breach. (Dkt. No. 715 at 5–11.) These two grounds are the subject of Microsoft’s present motion, and no material issues of fact remain for trial as to either. Moreover, even if Motorola’s lack of good faith were relevant, Motorola could not oppose summary judgment by claiming that Motorola sent its demand letters in good faith, because Motorola repeatedly asserted privilege to block discovery into the basis for its offers to Microsoft.1 Consistent with the Court’s prior ruling, given Motorola’s privilege objections, “[i]t would be unfair for Motorola to offer testimony of its choice” on the issue of any good faith basis for its demands, having “denied Microsoft the opportunity to examine the testimony in detail.” Wion Decl.2 Ex. 4 (October 29, 2012 Pretrial Conf. Tr.) 22:10–12.

Either of the two bases set forth above is sufficient to establish Motorola’s liability for breach of its RAND licensing commitments. Once the Court has granted summary judgment of liability, all that remains is to ascertain damages. If the parties cannot stipulate to the amount of damages, that issues can be resolved by a short jury trial.

And Motorola's response:
Preliminary Statement

Microsoft is not entitled to partial summary judgment on the disputed and fact-intensive question whether Motorola violated a duty of good faith as to its RAND licensing commitments. Contrary to Microsoft’s numerous suggestions in its motion, this Court has not effectively decided that issue through its earlier rulings in this case. Microsoft would take this Court’s April 2013 decision, reached after lengthy discovery and a full trial, and impute its conclusions back to October 2010 as if Motorola knew or should have known of the Court’s order. But whether the duty of good faith has been breached by a party is an “an issue for the trier of fact,” determined by reference to context and circumstances. 25 Wash. Prac., Contract Law And Practice § 5:12 (emphasis added). And numerous questions of disputed fact remain as to the actual facts of the parties’ respective knowledge and positions in October 2010. Microsoft argues that Motorola breached its duty of good faith per se by sending two letters identifying Motorola’s essential patents and setting forth Motorola’s standard royalty rate of 2.25% on the price of the end product and by later seeking injunctions. But Microsoft omits all the facts that tell a very different story:

First, Motorola sent these letters, as it had often done before, as part of the licensing discussions that sophisticated companies routinely engage in as part of the custom and practice of high-tech industries. Second, it was Microsoft that departed from that custom and practice by taking the unprecedented step of filing a breach-of-contract lawsuit just 20 days after receiving Motorola’s letter, without making any counteroffer. Third, the timeline of this case did not begin with Motorola’s letters in October 2010, but rather with Microsoft’s prior decision in October, 2010 to sue Motorola for patent infringement in the ITC and district court. It did so because Motorola had chosen the Google Android operating system for its smartphones rather than Microsoft’s commercially floundering Windows operating system for mobile devices. Fourth, the idea for the Motorola letters was Microsoft’s, not Motorola’s: After filing its lawsuits, Microsoft asked Motorola to put its patents on the table, and Motorola—under time pressure from Microsoft’s lawsuits—complied. Fifth , the letters included Motorola’s standard rate not in order to hold-up Microsoft but rather because that rate had been used in many previous bilateral negotiations with other companies. Sixth, by sending the letters, Motorola envisioned a back-and- forth discussion about both parties’ patents, with a wide range of possible outcomes if negotiations had proceeded. Seventh, Microsoft filed this lawsuit without making a single counteroffer or response of any kind, even though it knew well that opening offers are just that – opening offers— and that opening offers need not be on RAND terms. To the contrary, as Microsoft well knew, RAND rates and cross-licenses are reached as a result of an extensive negotiation process that involves consideration of many terms and not just a single royalty rate. It was Microsoft that short-circuited that discussion by its rush to court here.

These material issues of disputed fact as to whether Motorola violated the duty of good faith and fair dealing preclude summary judgment on this issue. This Court should also deny Microsoft’s motion for summary judgment on Motorola’s affirmative defenses. Contrary to Microsoft’s arguments, there is ample evidence supporting Motorola’s claims.

Update: And here's our second report:

The hearing lasted approximately 2 hours. The first hour was devoted to Microsoft's (MS) motions for summary judgement and the second to Motorola's (MT). The MS attorneys were familiar from the previous portion of the trial with Mr. Harrigan doing the majority of the speaking. On the Motorola side, Ms. Sullivan, one of the named partners, was in charge. For each of the sections it was supposed to be 20 minutes a side.

The main thrust of MS's motion for breach appeared to be that since MT's first offer was 4000 times the RAND rate that resulted from the other portion of the trial, a reasonable jury could only find in MS's favor. MS also seemed to be making the argument that continuing to pursue the possibility of an injunction via the appeals process after they had indicated a willingness to accept a RAND rate was blatantly commercially unreasonable (when Judge Robart was reading the first part of MS's motion, he laughed after he read aloud all the different 'unreasonable, commercially unreasonable, blatantly commercially unreasonable' descriptions MS used.) H.264 got described as a tiny piece of an optional part of the operating system. Another thrust for the unreasonableness is that the percentage price asked is the same across all products despite the different value of wifi in different products.

Ms. Sullivan's response was that these matters need to take the full context into account and that it was a matter for the jury. Basically the idea was that there was no authority for MS's position that a high offer letter could categorically lead to bad faith, so it had to go to a jury. Conceivably other cases with absurd offers seeking injunctive relief would be unreasonable, but not here. Sullivan seemed to make some of the points that have been discussed on Groklaw before -- namely that the timeline of the case is that MS sued and as part of those negotiations MS asked for a list of patents. MT didn't have much time to come up with a price analysis so sent an opening offer. There were various points about industry custom and practice being bilateral negotiations. A quote: "That's outrageous -- how about a couple of pennies" was Sullivan's example of how an opening offer can be responded to. Rightness and unclean hands inquiries are apparently intertwined, but the equitable one could be done after the trial in order to mitigate any damages.

There was some discussion of how Motorola had asserted privilege in depositions over the motives for Motorola sending the offer letters.

Harrigan was given 3 minutes to respond. "Is it bad faith to seek injunction following illusory offer?" Is it bad faith to sue before a RAND offer is rejected? Is it right after MS said it would take court RAND rate? Judge Robart interjected "Have you ever considered how much easier my life would be if you said you wouldn't take it and I could take the Judge Crabb approach" (tenses might be wrong in quote). Something about Motorola needing to show that MS was negligent in not choosing alternative (I wasn't really sure what that was about).

5 minute break.

Sullivan then goes first. There are apparently 3 theories of breach that MT wants to dispose of in summary judgement. Firstly violation of good faith that MT seeking injunctions. Argument here was that this simply isn't true and that judges are free to deny injunctions. And Motorola's was dismissed without prejudice. And MS sued them first, but that they are not moving for summary judgement to dismiss breach over the offer letters. There was a reference to, I believe, the antisuit injunction, and this antisuit injunction prevented MS from taking any harm as injunctions in Germany couldn't be enforced. Sullivan mentioned "I got well and truly thwacked in that case" (before the 9th Circuit) to which Robart responded, "I enjoyed the thrashing" (presumably because it was his order being appealed). The German action was filed July 2011, MS didn't say they would accept a RAND offer until Sept 2011, and as such breach can't be a moving target. MS is stuck with the facts at the time of the complaint. Robart seemed skeptical of this, "Do you have authority for that?" answer about getting back with more briefing "I think you're wrong, but I'll be happy to read your brief." [PJ: He was skeptical in this instance, but sometimes judges ask for a case because the point resonated enough to asked for a case to read to verify. It's kind of like on Groklaw if someone posts some extraordinary fact no one else knows about, we ask for a proof url, whether we think it's likely to exist or not.]

Sullivan says they have an ongoing duty, but a new breach action would be required, and the litigation in this case can't be included in this current breach action. Then mentions MS's June 2011 FTC letter saying RAND doesn't preclude injunctions. Robart suggests this undercuts Mr. Price (MT counsel yesterday?) argument that things after suit filed aren't relevant. Sullivan says it's only an additional thing for Robart. Mention of the FTC's recent thing about the consent order for Google/MT merger Docket 807 Page 5 Section D saying that MT doesn't need to withdraw previous requests for injunctions.

Judge Robart wants a timeline on the events. Either one, if the parties somehow agree, or one each, if they can't.

Then it's on to the Marvell and MPEG-LA motions. Basically the argument for both of these was a lack of being able to allocate damages across things. MS hasn't come up with a damages theory. Something about Robert's Declaration (I think saying MT didn't assert patents against Marvell) Exhibit L Page 98 Docket 721-2. Robart asked if MS would have standing for Marvell. Sullivan basically said that's a real question. And she'd be happy for it to be dismissed on standing, but wasn't their argument.

The MPEG-LA thing comes down to Google not being a party and MS wanting to keep trial dates doesn't let Article 3 get bent. MT didn't sign MPEG-LA. As of August 2012 Google made some offer that MS rejected. Robart then said he assumed they weren't asserting something called Noerr Pennington since they didn't mention it. At that point Sullivan talked about it.

The idea seems to be that you can't receive attorney's fees from other cases as damages in this case because it prevents you from seeking your equitable relief in court. Mention of ever-shifting theories on how to shift attorney's fees (this was yesterday, but I don't think we had an observer there, don't know if it was open to public). [PJ: That is talking about the Daubert hearing. See docket.] Robart then said "Do you want to be characterized as the pot or the kettle?" (I think because they were thinking about stuff on the spot). Sullivan at other points in this argument had mentioned the lack of any support for various things in WA state law (presumably the breach of contract claims are governed by that). Seattle vs Mcreedy says you can't get fees as damages from this case or another. Robart: "Not surprised you're a textualist." [PJ: They are saying you can't get attorneys' fees as damages because someone sued you for patent infringement. Lawyers shift things around trying to try to get fees sometimes. You oldtimers here may remember SCO trying for that in the Novell case. So that's what they are discussing.]

At this point Robart mentions that he gives 5 minutes a side to a young lawyer on each side sitting on the bench. Apparently this is because "Rule in this court at the end you get 5 minutes for what they should have said". Mr. Love for MS and Ms. Roberts for MT.

2nd MS guy for MS:
He says the various claims against MS are evidence for breach of contract vs separate damages so it should go to the jury. Seeking injunctions gets you leverage and the idea is that you can get threats to bring MS to heel with the first injunction. Classic case of hold up.

Robart: Problem I have is that you keep tacking things on as evidence of bad faith. At some point need to be applied to pleadings. Its evidence is not of that time frame (i.e., the time frame of the breach).

MS: Says on the Marvell front that had Marvell gotten a license, then the 802.11 stuff wouldn't have happened. MS' view that after first pleadings it was clear that MS wanted a RAND rate, so litigation after that was hold up and breach/unreasonable. MS had to relocate a redistribution facility in Germany (apparently), and there's no basis for removing stuff from the case. Suggested that MT's offer to Marvell was "heavy-handed intimidation" in that it excluded MS specifically and was 2.25% of downstream product price. They think that MPEG-LA is still ripe for the court to decide. Robart said: "At some point going down too many rabbit holes" and this seems like a giant one.

MS then discusses Judge Crabb's opinion claiming it doesn't provide things. 3 grounds for the fees:
1. Mentions things about when a covenant of good faith was covenant not to sue. Anchor Motor Freight case. Something in New Jersey, and you get attorneys fees as the right violated was basically not having to pay attorneys in a suit.
2. Fees are awarded for dissolving preliminary or permanent injunctions, and 3) the anti-suit thing meant the court would decide if the injunctions were proper. All Stars something case. A guy named Rick got fees.

Sullivan then got 30 seconds on fees. Basically said cases aren't applicable because they had express covenants not to sue. And the anti-suit thing protected against the injunctions, and MS had already decided to move the facility.

Then young attorneys' turns. Robart: Age of court worries him, you have to be almost dead, so if you bring young lawyers they get to speak. Both lawyers said their superiors did nothing wrong. Mr. Love, MS: Attorney-client privilege issues. Robart: "Slow down (gestures to court reporter). The most important person in the court room." Deposition stuff. Realtek can be addressed. The ITC injunction was sought when there was no RAND offer made. W. L. Gore Associates, an offer that's super high is basically no offer. A 1976 Case. Robart asked for judge's name, but he didn't have it handy.

Roberts: MPEG-LA. MS has no evidence of damages, nothing in their theory allocated damages to MPEG-LA. (She didn't use anything approaching her 5 minutes).

Harrigan then asked for housekeeping issues. The possibility of asking for a written questionaire of the jurors. But it would take 45 to 70 days, so too late now. So asked about a short one for them to fill out in the morning. Robart said the last time he allowed a short questionaire it ended up being 17 pages long in a case with the estate of lady who died from lung cancer vs a tobacco company. He and Judge Cohen went to school on what happened (unclear on what that meant). [PJ: He probably meant he wasn't agreeing with that suggestion, as he'd learned that it doesn't work out.] MS gave court preliminary MS/MT jury instructions (not completely certain about that part).

Then Robart's observations:
They have trial on 8/26 M, W, Th, Fri (not sure about tuesday), then Tue, Wed the next week. 16 hours a side. He listed stuff that comes out of that including jury selection (sounded to me like everything was in the 16 hours).

When he first came in today he was going to say that Davidson, Roberts, McKinley (MS witnesses) were not going to testify because of discovery issues. "Can't use law department as sword and shield" but he may revise it because of what he heard today (i.e., the attorney-client privilege claims that MT made in some deposition).

As I left the building, I ended up in the elevator with Mr. Harrigan and another MS attorney (3 people in elevator total). Harrigan said to the other attorney, "My original plan for her was to produce about 10-12 documents and let her talk about them." "Lawyers don't decide when to waive attorney-client privilege, so..." The first part I assume dealt with Ms. Sullivan, as she may have had issues balancing time spent (see Noerr Pennington reminder from Robart).

Here are his actual handwritten notes, as PDF, with more detail. I notice on page 5 something that strikes me. The judge says to Ms. Sullivan, "I'm waiting for you to tell me that the ITC has accepted where the courts are headed." This is right after she has said that Microsoft's response to the opening offer was unusual. Normally, an opening offer is responded to and negotiations begin, but Microsoft sued instead, and when Motorola sought injunctive relief, it claimed that was bad faith. Ms. Sulivan, according to the notes, said that while judges can deny RAND injunctions that are asked for, the asking can't by itself be bad faith, particularly in this case where Microsoft hadn't said they'd give Motorola any money at all and sued instead of moving for summary judgment on the offer letters.

I take his remark as a bad sign, that he doesn't like what the ITC did, because it makes him look like he's out of step. But, he is, as Ms. Sullivan tells him. There are no cases where injunctions are barred for standard essential patents or where seeking injunctions are ruled as bad faith. He would be a first, an outlier. But I think he's indicating he thinks the opposite, that it's ITC that is out of step with the movement of the courts, and he has a point.

Then he asks her, "Are you arguing that Motorola never sought the injunction in Germany *after* Microsoft said they were a willing licensee? She is arguing that, as she points out the timeline is that the German action was filed in July of 2011. It wasn't until after that Microsoft said, in September, that it was a willing licensee. Her argument then is that "breach" can't be a moving target. The dates are set as to the time of conflict. That is the point that he says she thinks she's wrong about and asks for a case, meaning he'll accept a brief. She points out that it was in June of 2011 that Microsoft wrote to the FTC, opining that RAND should not preclude injunctions, so how can it be a violation of good faith to ask for one?

That's why he asks for a timeline. I gather he thought Motorola sought an injunction in Germany after Microsoft said it was willing, and he wonders if under the law it matters anyhow.


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