Last week, we noted that the Federal Circuit will hold a September 11 oral argument in Apple and Motorola’s appeals of Judge Posner’s June 2012 decision to dismiss the parties’ competing infringement suits. The “Posner appeal” will provide the Federal Circuit with the opportunity to weigh in on SEP issues in a patent infringement context, such as how the FRAND framework may constrain damages, and whether a party with a FRAND commitment can ever satisfy the eBay standard for an injunction. But this appeal is not the only one involving Apple, Motorola, and FRAND/SEP issues that is pending before the Federal Circuit.
Also last week, Apple filed its opening brief in this other Federal Circuit appeal — the appeal of Judge Barbara Crabb’s November 2012 decision to dismiss Apple’s FRAND-related breach of contract suit on the eve of trial (after, at least in Judge Crabb’s eyes, Apple failed to commit to entering into a FRAND license at the rate she might set — see this link for a brief refresher on the details of this particular case). The case before Judge Crabb (and consequently, this appeal) is more like Microsoft’s original complaint in the Microsoft-Motorola case, as opposed to the case before Judge Posner — there are no infringement claims, only claims brought by Apple that relate to Motorola’s alleged violation of its FRAND commitments (breach of contract, antitrust, etc.). Apple frames the issues in this appeal as follows:
- Apple provided evidence that Motorola violated § 2 of the Sherman Act by making deceptive FRAND commitments and by failing to timely disclose its intellectual property. The Noerr-Pennington doctrine immunizes a party from antitrust liability only where the challenged conduct is the petitioning of a government entity. Did the district court err in holding that Apple’s antitrust claim was barred by the Noerr-Pennington doctrine?
- Apple would not commit to accept a license offer from Motorola without knowing the price. Did the district court err by dismissing Apple’s contract claims on that basis, where Apple had no contractual obligation to accept any offer from Motorola?
- Apple asserted three declaratory judgment claims that would have settled uncertainty regarding Motorola’s patent rights and obligations. Did the district court err in refusing to adjudicate those claims?
- Does this Court have exclusive appellate jurisdiction over this appeal because the suit encompasses declaratory judgment claims relating to Motorola’s patent suit?
According to Apple, the answer to each of these questions is a resounding yes. After the jump, we’ll take a look at Apple’s brief in a bit more detail.
During the litigation in Wisconsin, the court dismissed Apple’s antitrust claim (attempted monopolization in violation of Sherman Act § 2), finding that because Apple’s antitrust claims were based on Motorola’s patent litigation activities, and those activities are petitioning activities protected by the First Amendment, Apple’s antitrust claims are barred under the Noerr-Pennington doctrine. On appeal, Apple argues that the alleged anticompetitive conduct was not Motorola’s litigation activity, but Motorola’s allegedly deceptive conduct before the relevant SSOs (here, the IEEE and ETSI) — specifically, Motorola’s promise that it would offer licenses on FRAND terms for its SEPs. Apple also claims that Motorola improperly failed to disclose information about certain patent applications that would later issue as alleged SEPs. Apple relies heavily on the 3rd Circuit’s 2007 opinion in Broadcom v. Qualcomm, where the court held that an SEP holder’s intentionally false promise to an SSO to license its SEPs on FRAND terms, coupled with a breach of that promise, constitutes anticompetitive conduct.
Apple argues that the district court wrongly focused on Apple’s theory of damages in applying Noerr-Pennington to immunize Motorola’s conduct from antitrust scrutiny. According to Apple, it can prove an antitrust violation based on SSO conduct and Motorola’s subsequent license demands alone, without reference to Motorola’s infringement suits. As such, Apple claims the antitrust claim should be remanded for trial.
Apple’s obligations (if any) under Motorola’s FRAND commitment
On the eve of trial, Judge Crabb dismissed Apple’s breach of contract claim in part because Apple told the court that it would not commit to taking a FRAND license if the rate was higher than $1 per device (i.e., iPhone). Apple tells the Federal Circuit here that because the FRAND obligations were undertaken by Motorola, it is only Motorola — not Apple — that must comply, and that specific performance is appropriate. Apple “wants the FRAND offer Motorola committed to make. Period.”
Apple likens the FRAND commitment to an options contract, where the seller (here, the SEP holder) grants to a potential buyer (here, the standards implementer & potential licensee) an option to buy a stock (here, an SEP license) at a particular price (here, the FRAND rate). Apple argues that just as with an options contract, the FRAND commitment does not require the buyer/licensee to exercise its right to purchase (or license) at that price.
As further ammunition, Apple points to Motorola’s success rate in enforcing its SEPs in court, where it asserts Motorola “is batting 0-8 in establishing liability in U.S. actions” (interestingly omitting an SEP infringement finding in Germany and the subsequent Germany-only SEP license between Motorola and Apple that followed). Apple notes that its $1 per iPhone price was for “litigation peace” and that any higher RAND rates would have had to be evaluated — just as any offers made in regular license negotiations would have. Apple urges that Federal Circuit to remand the case to make a FRAND royalty determination.
As an aside, this issue may be the most interesting one in the appeal, and one that is highly debated in the SEP community. While Apple paints Motorola’s obligation as one to make a “FRAND offer” — a license offer at one particular price point — its black and white view of the FRAND commitment is not necessarily shared by all. There is also the question of whether FRAND royalty-setting as a bargaining chip is the best use of judicial resources, or whether it is more suited for arbitration (although patent infringement damages awards are constantly used as bargaining chips within larger business disputes). Perhaps this is an issue that may be addressed by SSOs in their bylaws in the future.
Adjudication of DJ claims
To that end, Apple argues that resolution of the FRAND rate would in fact push the parties closer to a settlement of a wider-ranging dispute, and that the district court was wrong to “trivialize” the judgment sought as a “bargaining chip.” Apple argues that the court’s determination would resolve uncertainty — both the value of a FRAND license to Motorola’s SEPs, along with the potential unenforceability of one of Motorola cellular essential patents (based on an alleged failure to disclose to ETSI). Apple asserts that Judge Crabb applied the wrong standard in requiring that the relief sought by Apple would definitively end the parties’ dispute, and it asks the Federal Circuit to remand these claims for trial.
The Federal Circuit’s appellate jurisdiction
As you may recall, Motorola already asked the Federal Circuit to transfer this appeal to the Seventh Circuit, and the Federal Circuit denied its motion (but allowed the parties to brief the issue in their regular briefs). We’ve previously discussed how the issue of appellate jurisdiction in FRAND-related cases can be a murky one, and that may be the case here. But Apple doesn’t believe there is any problem with the Federal Circuit’s jurisdiction.
Apple argues that this case “arises under” the patent laws, because Apple sought (at least) a declaratory judgment that one of Motorola’s patents was unenforceable for patent misuse. Apple claims that under the “well-pleaded complaint rule,” Motorola’s hypothetical coercive claim is for patent infringement — and in fact, Motorola’s actual complaint (filed in the ITC) did in fact allege infringement. As a fallback, Apple also argues that resolution of its FRAND-related DJ claim depends on the resolution of a substantive issue of patent law, because it “requires a valuation of Motorola’s patents.” But as we noted in our May 2013 post on the appellate jurisdiction of the Microsoft-Motorola case, it’s not clear whether that alone would be enough to vest the Federal Circuit with appellate jurisdiction — patents can be “valued” in plenty of disputes that have nothing to do with substantive patent law (such as damages). The jurisdictional issue will certainly be one to watch, as well.