A month ago, we discussed how Microsoft and Motorola filed dueling summary judgment motions in an attempt to eliminate some of the issues from the upcoming RAND breach of contract jury trial in Seattle (currently set to begin August 26). Judge James L. Robart held an oral argument on July 31, and this morning, his order hit the docket (the order is actually dated yesterday — Judge Robart is apparently not taking Sundays off).
As you can tell from the title of this post, Judge Robart granted summary judgment on some — but not nearly all — of the issues briefed by the parties. Both Microsoft and Motorola prevailed on some issues and lost on others. The bottom line is that the jury will still have a lot to decide in this case. After the jump, we’ll take a look at how Judge Robart ruled — starting with the motions that he denied.
Microsoft’s Motion for Summary Judgment of RAND Breach — DENIED
Microsoft had argued that in light of the difference between the court-determined RAND-royalty and Motorola’s initial 2.25% license offers, no reasonable juror could find that Motorola was negotiating in good faith, and that Motorola thereby breached its RAND obligation. Microsoft also said that summary judgment was warranted because these offers, when combined with Motorola seeking injunctive relief for infringement of RAND-committed SEPs, showed that Motorola was frustrating the purpose of the RAND commitment.
Judge Robart disagreed, denying Microsoft’s motion and holding that genuine issues of material fact remained. Specifically, as to Motorola’s initial offers, he found that:
[W]hether Motorola’s offer letters were commercially reasonable requires more than a simple comparison between the royalty rate included in the offer letters and the determined RAND rate, as Microsoft urges. Such a determination requires examination and interpretation of the language in the letters themselves, including the language therein suggesting Motorola sent the letters in the hopes of receiving a cross-license agreement from Microsoft (“subject to a grant back license”). Additionally, the finder-of-fact will hear evidence of the circumstances surrounding Motorola’s October offer letters. Motorola will present evidence that Microsoft requested Motorola make an offer for Motorola’s 802.11 and H.264 SEPs and that the parties were engaged in licensing negotiations prior to the October offer letters.
He also noted that the jury will likely consider evidence from Motorola concerning industry RAND licensing practices, evidence that will be relevant for the jury to consider.
As to Motorola seeking injunctive relief, he found that seeking injunctive relief is not always improper under the RAND commitment. He noted that Microsoft did not point to a ‘specific action” by Motorola that violated its duty of good faith, stating that the “muddied” licensing negotiation history between the parties makes this a very fact-intensive question for the jury to decide.
Motorola’s Motion for Summary Judgment of No Attorneys’ Fees Damages — DENIED
Under the “American Rule,” parties generally bear their own costs of litigation, such as attorneys fees. This rule, however, is subject to certain exceptions, and can change on a state-by-state basis. Here, Motorola had moved for summary judgment on Microsoft’s attorneys’ fees-related damages claim, arguing that Microsoft failed to articulate a legal basis to be awarded attorneys fees in this breach of contract case.
Although Judge Robart largely agreed with Motorola that attorneys’ fees were not recoverable in breach of contract cases — and that, under Washington law, Microsoft had not shown that any exceptions to the “American Rule” applied — he still nonetheless denied Motorola’s motion. Judge Robart agreed with Microsoft’s theory that its claim for attorneys’ fees damages is based on an alleged violation of a covenant not to sue — with the modification here that the RAND commitment is generally akin to a covenant not to sue for injunctive relief in violation of the duty of good faith and fair dealing. (While he found that the violation of a covenant not to sue was not an exception previously recognized by Washington courts — it had not been addressed at all — Judge Robart predicted that if a Washington court were to consider this exception, it would recognize it.)
This means that at trial, Microsoft’s breach of contract theories could essentially be split by the court for liability purposes — attorneys’ fees will only be recoverable as damages if the jury finds specifically that Motorola breached its RAND obligations by wrongfully seeking injunctive relief in bad faith. If the jury finds only that Motorola violated RAND through its entire course of dealing in negotiations (its initial license offers, etc.), Motorola will not have to pay attorneys’ fees as damages. The jury instructions on these issues are going to be quite detailed, one can imagine.
Motorola’s Motions for Summary Judgment of No RAND Breach re: Seeking Injunctions and Marvell — DENIED
Part of Microsoft’s “course of dealing” RAND breach claim is that Motorola failed to offer Marvell — Microsoft’s 802.11 WiFi chip supplier — a RAND license that would flow through to Microsoft, and that this is further evidence of Motorola’s RAND breach. Motorola moved for summary judgment on this issue, arguing that this conduct occurred well after Microsoft’s complaint was filed, that Motorola had no duty to Marvell vis-a-vis RAND obligations with Microsoft, and that in any event, Motorola did offer a license to Marvell (albeit once that “carved out” Microsoft products). Motorola also moved for summary judgment seeking a ruling that Motorola’s injunctive relief claims were not a breach of RAND because they occurred after the filing of Microsoft’s complaint and were protected by the Noerr-Pennington doctrine.
Judge Robart denied the motions. As to the timing of the Marvell negotiations and Motorola seeking injunctive relief, he found that the mere fact that these occurred subsequent to Microsoft’s initial complaint was immaterial, because Microsoft (1) filed an amended complaint in February 2011, and (2) was arguing that Motorola’s entire course of dealing breached its RAND obligation. (Although in a footnote on p. 25, even Judge Robart seems confused about when this case originally began, stating that it was filed in October 2010, a month before Microsoft filed its original complaint). Additionally, Judge Robart found that the propriety of seeking injunctive relief and the propriety of allegedly failing to negotiate license agreements with a supplier are fact-intensive issues that the jury should decide. (As we’ve noted before, the issue of RAND licensing vis-a-vis chip suppliers and different levels of the supply chain may be uncharted waters that are ripe for exploration. In that vein, Judge Robart actually ordered the parties to submit additional briefing regarding whether a consummated Motorola-Marvell license on 802.11 patents would exhaust Motorola’s ability to seek royalties from Microsoft as well.) Lastly, Judge Robart agreed with Judge Crabb’s conclusion in the Apple-Motorola case that Noerr-Pennington does not apply to insulate parties from RAND breach of contract claims.
Microsoft’s Motion on Motorola’s Affirmative Defenses — GRANTED
Microsoft had moved for summary judgment on several Motorola affirmative defenses — waiver, ripeness, repudiation, failure to mitigate, etc. — arguing that these had effectively been resolved by prior court rulings. Motorola agreed that some had been resolved, but argued that it needed to be able to present to the jury evidence the Microsoft failed to mitigate damages.
Judge Robart granted Microsoft’s motion on these affirmative defenses, but in doing so, noted that “Motorola may certainly argue under the law that Microsoft had a duty to mitigate damages and failed to do so.” But he distinguished between that argument — which would reduce damages — with an affirmative defense, which would defeat Microsoft’s claim completely if proven.
Motorola’s Motion on No RAND Breach re: Google-MPEG LA Agreement — GRANTED
Finally, Judge Robart granted Motorola’s motion concerning the Google-MPEG LA H.264 patent pool agreement, finding that Microsoft could not argue that Motorola breached its H.264-related RAND obligations because Google did not grant Microsoft a license at the pool rate. (Microsoft had argued this was part of Motorola’s “course of dealing” RAND breach.) Judge Robart noted that had Microsoft wanted to make this argument, it had the opportunity to add Google as a defendant, but it did not do so.