Much of the activity and attention in the standard-essential patent world over the last few days has been focused on Judge James L. Robart’s groundbreaking decision in the Microsoft-Motorola RAND breach of contract case. But that wasn’t the only RAND-related bit of news happening this past Thursday — that same day, in the Federal Circuit, Apple filed its response to Motorola’s appeal of Judge Posner’s decision to deny both damages and injunctive relief to Motorola in a case involving Apple’s alleged infringement of Motorola standard-essential patents.
Due to the fact that the Federal Circuit has consolidated appeals by both parties, Apple’s brief is technically both a response brief and a reply brief — but we will only deal with the SEP-specific issues here. In the brief, which we’ll delve into after the jump, Apple urges the Federal Circuit to uphold Judge Posner’s findings that, even if infringement could be proven: (1) Motorola failed to introduce a cognizable damages theory for infringement of the SEPs at issue; and (2) Motorola could not show entitlement to injunctive relief for its FRAND-encumbered patents.
You may recall that these two issues of damages and injunctive relief for FRAND-pledged patents have attracted quite a bit of attention from a number of amici over the past few months, with briefs being filed in support of both parties.
In the case, Motorola had actually alleged Apple to infringe three different standard-essential patents — two relating to ETSI telecommunications standards, and one relating to the IEEE 802.11 wireless networking standard. But by the time Judge Posner actually addressed the remedies sought by Motorola, only one patent remained — U.S. Patent No. 6,359,898, which Motorola alleged was essential to the ETSI GPRS telecommunications standard (and therefore to the UMTS 3G standard). Apple’s brief on remedies is generally targeted to issues involving the ‘898 patent (although it offers arguments as a fallback for the other two patents).
Damages must be based on ex ante, incremental value
In dismissing Motorola’s claim for damages, Judge Posner criticized Motorola for relying on a damages value that sought monetary compensation unrelated to the value of the “patent qua patent.” Apple notes in its brief that the question at issue is “how to assess whether the Motorola patents are worth anything apart from their incorporation into a standard” — and asserts that the answer lies in doing an ex ante analysis to ascertain what the cost would have been of implementing alternative technology in the standard at the time Motorola’s patented technology was incorporated.
Apple’s argues that there was not just one, but two alternatives to the ‘898 patent’s “countdown functionality” that could have been incorporated into the standard — and that those alternative technologies were both unpatented, and therefore free to implement. Apple argues that any damages owed to Motorola would be limited to the incremental value of the ‘898 patent over those alternatives, and that Motorola “did not even try” to offer any evidence on this point. Apple also contends that Motorola has improperly tried to shift the burden of establishing the availability and effect of alternative technologies to Apple.
(Note that Apple’s ex ante position differs somewhat from the approach just sanctioned in Microsoft-Motorola by Judge Robart, who merely noted that an ex ante analysis could be a relevant data point as part of a larger, Georgia-Pacific-driven hypothetical negotiation between the parties.)
Apple also takes Motorola to task over Motorola’s position that it is entitled to some portion over the entire value of Apple’s accused products because the cellular-essential functionality enables the other functionality of the iPhone. Apple cites a variety of Federal Circuit case law criticizing similar approaches. Additionally, Apple argues that to the extent Motorola has apportioned its overall portfolio “ask” of 2.25% to the patents-in-suit, Motorola did not do so with respect to the merits or relative importance of the patents themselves. Thus, the damages sought are not linked to the patents, and Judge Posner’s dismissal of Motorola’s damages claims should be upheld.
Motorola didn’t satisfy “high bar” of injunctive relief
Apple argues that the district court properly determined that Motorola could not get an injunction as a remedy for infringement of FRAND-pledged SEPs. Apple actually adds an additional argument that this issue is now moot on appeal, because Motorola has committed to the FTC that it will not seek injunctive relief on FRAND patents against willing licensees.
Apple contends that in finding that a FRAND royalty would provide Motorola all the relief it would be entitled to, Judge Posner essentially held that Motorola could not satisfy the first two eBay factors of irreparable harm and inadequacy of damages. Apple cites other district courts that have similarly found, including the Microsoft-Motorola court. Taking on Motorola’s argument that injunctive relief must be available to “bring Apple to the negotiating table,” Apple asserts that this type of behavior is precisely what the FRAND commitment is supposed to prevent.
One widespread concern among standard-essential patent holders is that without injunctive relief, potential licensees may be tempted to “hold out” and refuse to negotiate — forcing SEP owners to bring serial infringement claims. Apple argues that “there is nothing unfair in requiring Motorola to establish that it owns a valid and infringed patent; that is the responsibility of every patent plaintiff.” Furthermore, Apple argues that there are other incentives for potential licensees to negotiate, such as litigation expenses and the risk that a court might award a higher-than-expected rate or even treble damages for willful infringement.
Finally, Apple argues that even though the district court didn’t necessarily address the last two eBay factors, Motorola cannot establish that the balance of hardships or publish interest favors an injunction. And Apple takes issue with Motorola’s argument that Judge Posner’s decision creates a “categorical rule against injunctions” for FRAND patents. Apple argues that Judge Posner considered the fact of the FRAND commitment as part of his eBay analysis, not as an attempt to short-circuit it — and that this was well within his discretion.