Earlier this week, we noted that Apple directed the Federal Circuit’s attention to Judge Robart’s Microsoft-Motorola decision in Apple-Motorola “Posner Appeal.” (For a recap of the parties’ FRAND-related appellate briefing in the case thus far, see our prior posts on Motorola’s opening brief and Apple’s responsive brief). Yesterday, Motorola’s reply brief became publicly available.
[2013.05.13 Motorola Reply Brief (12-1548)]
In its brief — summarized after the jump — Motorola reiterates its prior arguments to the Federal Circuit that Judge Posner erred in concluding that Motorola could not prove entitlement to either monetary or injunctive relief as compensation for Apple’s alleged infringement. But Motorola does not just repeat the same arguments it made in its opening brief — it also attempts to address arguments raised by Apple concerning patent hold-up and the effect of the January 2013 FTC-Google consent decree.
Motorola strongly asserts that its license agreements with “all of the major handset manufacturers selling in the United States” (aside from Apple, of course) are highly probative of the appropriate measure of damages. Here, Motorola takes on Apple’s assertion that the rates in Motorola’s prior SEP licenses are artificially high due to patent hold-up (i.e., the fact that the licensees were locked into the standard). Motorola claims that it has been licensing its cellular and WiFi SEPs since 1992, and its license agreements from time periods both before and after the SEPs at issue in this case were incorporated into the standards have “comparable payment terms.” According to Motorola, these license agreements are examples of real-life, bilaterally-negotiated compensation for portfolios containing the SEPs at issue and should have been presented to a jury. (Note that although Motorola does not cite Judge Robart’s Microsoft-Motorola RAND-setting decision here, its approach appears to comport with his analysis — although, of course, that case involved a portfolio license, not damages for individual patents).
Motorola also disputes Apple’s claim that in seeking a royalty based on the end price of Apple’s products, Motorola is improperly applying the Entire Market Value Rule. Motorola attempts to distinguish the Federal Circuit’s ruling in LaserDynamics v. Quanta — arguing that in that case, the evidence showed that customary licensing practices were based on lump-sum royalties, not percentage royalties. Here, by contrast, Motorola argues that it has “numerous license agreements” that “actually calculate a running royalty based on the price of handsets,” supporting Motorola’s theory. Motorola also claims that it properly “apportioned” the value of its SEPs at issue, discounting its portfolio rate to account for reasonable royalty damages award in patent litigation.
Motorola also includes an interesting FRAND-related statement in its damages section, where it takes issue with Apple’s attempt to use a license that Motorola has with Chi Mei (a chip and module supplier) as a benchmark for the appropriate royalty. Motorola argues that FRAND-encumbered SEP owners “do not violate FRAND by offering different royalties to differently-situated companies” — and as such, Motorola could offer a Taiwanese chip supplier like Chi Mei a different royalty structure than Apple, “an American competitor selling mobile phones.”
Although this is not a detailed policy statement, I am sure that there are many out there who might take issue with this view of FRAND. For example, we only need to look back a few weeks to the Microsoft-Motorola decision, where Judge Robart used royalties paid by a chip supplier, Marvell, as a benchmark for the appropriate FRAND rate for Microsoft’s end products (the Xbox gaming console). This issue of treated differently-situated companies differently in FRAND licensing appears to be an issue that is primed for more development (likely in litigation) as we go forward.
Motorola repeats its claim that Judge Posner’s ruling created a “categorical rule” against injunctions for FRAND patents. Motorola argues that the availability of injunctive relief is necessary to prevent nefarious conduct from an “intransigent infringer” such as Apple — who Motorola claims refuses to pay court-ordered FRAND rates. And once again, Motorola asserts that FRAND commitments do not unequivocally demonstrate that monetary damages are adequate or that irreparable harm cannot be shown — Motorola wants each case to be determined on its own facts, which it says Judge Posner failed to do.
But the most intriguing part of Motorola’s section on injunctive relief is a short subsection arguing that “the FTC consent decree does not prevent Motorola from seeking an injunction here” (recall that in its responsive brief, Apple argued that the injunctive relief issue was moot because Motorola agreed to forego seeking injunctive relief). With the aid of a clever bit of word-smithing, Motorola argues that “nothing in the consent decree prevents Google from opposing the imposition of an effectively categorical rule against injunctions involving any SEPs or from continuing to seek an injunction in a case that is already pending in federal court.” Instead, Motorola asserts that the FTC consent decree merely prevents it from “obtaining or enforcing” injunctive relief in a pending action unless it first makes “Qualified Offers” under the agreement, and these Qualified Offers are refused.
According to Motorola, should the Federal Circuit reverse and remand the case, Motorola could still have the opportunity to prove infringement, satisfy the eBay factors, and make Qualified Offers to Apple. Motorola contends that if those offers are refused, nothing in the FTC’s consent decree prevents Motorola from obtaining or enforcing an injunction. It seems that Motorola is essentially making a policy argument here — if the Federal Circuit were to affirm Judge Posner and effectively nullify injunctions for any FRAND-encumbered patents, then even the limited exceptions in the FTC consent decree allowing injunctive relief could never apply (i.e., where an infringer refuses to pay an adjudicated FRAND rate).