Motorola and Apple are currently facing off over patent-related issues in several ongoing judicial proceedings, including multiple appeals before the United States Court of Appeals for the Federal Circuit. One of these Federal Circuit appeals was brought by Apple over Judge Crabb’s dismissal of Apple’s claims that Motorola violated the antitrust laws and breached its contracts with SSOs in conducting its SEP-related licensing and enforcement activities. But on January 25, Motorola filed a motion with the Federal Circuit to dismiss Apple’s appeal (or transfer it to the Seventh Circuit), asserting that the Federal Circuit lacks jurisdiction to hear the case. While at first blush this seems like just a mundane dispute over civil procedure issues, a decision on this motion may have significant consequences for future FRAND-related proceedings.
As detailed in our earlier post on this case, Apple’s claims in this action originally were brought as counterclaims in a U.S. International Trade Commission investigation brought by Motorola against Apple (Inv. No. 337-TA-745). But because the ITC is not empowered to hear counterclaims, these claims were removed by statute to the U.S. District Court for the Western District of Wisconsin, where they were filed as a new complaint.
Motorola’s motion alleges that: (1) Apple’s complaint does not cite patent law as the basis for federal subject matter jurisdiction over its claims, but instead invokes diversity of citizenship (under 28 U.S.C. § 1332(a)); and (2) federal law (specifically, 28 U.S.C. § 1295(a)(1)) limits the exclusive jurisdiction of the Federal Circuit to patent cases that “arise under” the patent laws. Thus, according to Motorola, Apple’s claims here are merely antitrust and breach of contract-related claims that happen to concern Motorola’s patents, but do not depend on resolution of any particular patent law issue (e.g., damages, infringement, invalidity, etc.). Therefore, Motorola argues, Apple’s claims do not “arise under” the patent laws and the Federal Circuit is not empowered to hear the case.
Motorola does note that Apple disagrees with Motorola’s view and is expected to file a response to that effect. In that response, Apple will likely address the fact that its claims were brought as counterclaims to Motorola’s own patent infringement claims, as well as the fact that Apple brought a claim of patent misuse against Motorola — both of which may bring the action closer to having “arisen under” the patent laws.
Potential Consequences — Circuit Splits?
The Federal Circuit’s decision to keep, transfer, or dismiss the appeal will have some interesting consequences for future actions. One central issue that the court may have to contend with is whether the determination of a FRAND rate for a portfolio of patents is tantamount or highly related to a determination of patent damages (an area in which the Federal Circuit clearly has exclusive jurisdiction). If so, the Federal Circuit might choose to keep the case in an attempt to promote uniformity in patent law.
Ensuring uniformity in the application of the patent laws was one of the main reasons for creating the Federal Circuit in the first place. But if multiple circuits wind up exercising appellate jurisdiction over FRAND-related licensing disputes and making independent determinations about how to determine FRAND terms, we may see different a number of different circuits developing their own standards and multi-factor tests to apply in any given licensing situation — similar to what has happened with how the different circuits apply the “likelihood of confusion” standard for trademark infringement. Down the road, this could encourage forum shopping among parties embroiled in FRAND-setting actions, as parties seek out the circuits that apply the most patentee- or licensee-friendly tests.
Lastly, this might not be the last case where the Federal Circuit faces this issue. For example, in the Microsoft-Motorola breach of contract action currently pending before Judge Robart in the Western District of Washington, Motorola already has appealed one ruling by Judge Robart (his entry of a preliminary injunction banning Motorola from enforcing a patent injunction abroad) to the Ninth Circuit. But Microsoft has urged that Judge Robart apply patent law damages principles, such as the Entire Market Value rule, in determining the appropriate (F)RAND rate for Motorola’s patents. If Motorola (or Microsoft) disagrees with Judge Robart’s ultimate (F)RAND determination, would it be appropriate to appeal that to the Federal Circuit instead? The Federal Circuit’s opinion in Apple-Motorola may provide some guidance.