Print 38 comment(s) - last by retrospooty.. on Aug 30 at 10:39 AM

Those who don't settle with the DOJ are often broken up for face stiffer consequences

Apple, Inc. (AAPL) was found guilty in July by U.S. District Judge Denise Cote of the U.S. District Court for the Southern District of New York of costing customers "millions of dollars" by entering into secret deals with eBook publishers and offering to reward them for blacklisting Apple's competitor, Inc. (AMZN). However, Apple remains resolute and defiant in its most recent briefing rejecting arguments from the U.S. Department of Justice (DOJ) who are trying to convince it to accept a settlement offer.

I. Judge Reject's Apple's "Hypocritical" Demands

While some aspects of the DOJ's proposed settlement -- such as allowing competitors to offer link to direct content sales portals which Apple does not receive a cut from -- represent a fundamental assaults on Apple's "walled garden" model, Apple's decision not to settle is somewhat surprising given the potential severity that a trial could have for it, both in terms of image and in  the possibility of even more severe punishments.

Judge Cote had ordered both parties to submit letter briefs to the court discussing their goals in reaching a settlement.

Apple iPad
Apple rejected a proposed DOJ settlement after a judge found it guilty of e-book antitrust violations.  [Image Source: Telegraph]

The DOJ in a court brief argued that Apple should accept most of its terms and scoffed at Apple's proposal to allow it to "police itself".  The DOJ lawyers comment:
[G]iven Apple’s unwillingness to appreciate that its conduct violated the antitrustlaws and harmed consumers, it is difficult to understand how leaving it to the company to solely police itself going forward will remedy its antitrust violations and deter future ones.

Request for E-book Letter by Mikey Campbell

Apple's legal team --- which the DOJ says is not interested in playing by the rules, but is rather hired to "[enhance] its capabilities in defending litigation against antitrust violations" -- fires back arguing:

[The plaintiffs] did not submit a focused letter.  Instead they filed a 12-page broadside masquerading as a brief repeating their prior arguments and largely ignoring this Court's core guidance.  They also attached 72 pages of documents -- many simply pulled off the internet, and none in the trial record.  The brief did not express the Court's concerns, but rather is a transparent effort to again attack the credibility of Apple and its counsel, and obtain an injunction wildly out of proportion to the issues and evidence in this case, in order to punish Apple for defending itself at trial.
The parties have been litigating long enough to understand what it means to file letters setting forth their positions.There is simply no excuse for plaintiffs' disregard of the Court's order, and their inclusion of non-record material on issues not adjudicated by this Court in this case.

DOJ Proposal Brief by Mikey Campbell

But Apple itself commits the same offense that it accused the DOJ of -- villainizing its rival in the brief and repeating its own arguments.  For example it writes:

Apple feels compelled to reiterate that its commitment to legal compliance, including antitrust compliance, is unconditional, and steadfast... Apple's [self-policing] compliance training... is intended to address legal obligations... Apple's defense of the case... should not be a basis to impose external monitoring.

In other words, Apple attacks the DOJ for repeating its arguments, yet repeats its own arguments in many places in its own brief.  Perhaps for that reason Judge Cote rejected Apple's "demand" that the DOJ submit a new "more focused" brief.

II. More Severe Punishments Could Await Apple at Trial

With the parties set to meet again on Tuesday, it appears that Apple is treading on dangerous ground.  The company has already struggled to defend itself in the case.  Apple's internet software and services chief, Eddy Cue, who masterminded the e-book deals, admitted that his company was responsible for raising e-book prices.  He appeared to concede that his company's deals later drove up e-book prices from the former de facto rate of $10 to $15.  Asked if Apple (or Amazon) customers complained about the higher prices, he commented, "They may or may not have, I can't recall."

And Judge Cote has largely sided with the DOJ lawyers even as Apple has tried the same failing tactics over and over again in an effort to escape punishment.

[Image Source: CNET]
Many argue the DOJ brings antitrust actions far too rarely, and when it does bring them it seldom does so without strong and conclusive evidence.  For that reason, most companies who are ruled likely guilty during preliminary hearings decline to go to trial.  Indeed Apple's publishing partners who once allegedly conspired with it to damage Amazon have all agreed to DOJ settlements.

In 1999 the DOJ met another stubborn tech superpower -- Microsoft Corp. (MSFT).  Microsoft agreed to settle (eventually) after being found guilty in a Judge's statement of fact, but after struggling in an appeal offered to do otherwise.  Microsoft's settlement similarly was viewed as onerous within the company, but was viewed as modest at best by outside observers.

But ultimately Microsoft's decision to settle was driven heavily by the fear that the DOJ would use its ultimate power to exact a "death penalty" of sorts, breaking up the abusive company into smaller corporate subunits.  That's precisely what the DOJ did in its case against U.S. vs. AT&T.

AT&T glass
AT&T was broken up in the 1980s after it refused to settle with the DOJ.
[Image Source: Reuters/Shannon Stapleton]

While a DOJ breakup of Apple seems unlikely given the Obama administration's cozy relationship with the Cupertino company (late company co-founder and CEO Steven P. Jobs was President Obama's technology campaign director back in 2011), cash rich Apple could certainly be smacked with large fines or other more dangerous punishments, should it continue to refuse to cooperate and take the case to court.

Sources: Apple Insider, DOJ Brief, Apple Brief

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RE: Stretching it a bit?
By sprockkets on 8/27/2013 10:41:50 PM , Rating: 6
It's not a nice theory - it is the law. Read the ITC decision yourself.

Apple also criticizes Samsung for tying some of its license offers to the settlement of litigation. We find Apple's argument to be somewhat hypocritical. The following sentence from Apple's submission to the Commission on April 10, 2013, indicates that Apple has no intention of paying Samsung any royalties until after the conclusion of litigation:
If the Commission were to determine that the '348 patent is valid, infringed, and enforceable -- and it should not for all the reasons the ALJ found and Apple previously briefed -- and if that judgment were affirmed on appeal, Apple would stand ready to pay FRAND royalties.
Resp. Apple Inc.'s Reply Submission at 20 (April 10, 2013) (public version April 12, 2013).
Apple's position illustrates the potential problem of so-called reverse patent hold-up , a concern identified in many of the public comments received by the Commission.20 In reverse patent hold-up, an implementer utilizes declared-essential technology without compensation to the patent owner under the guise that the patent's owner's offers to license were not fair or reasonable. The patent owner is therefore forced to defend its rights through expensive litigation. In the meantime, the patent owner is deprived of the exclusionary remedy that should normally flow when a party refuses to pay for the use of a patented invention….

Samsung can hardly be accused of patent hold-up when it has licensed its declared-essential patents -- including the '348 and '644 patents -- to more than 30 companies.

Apple and some public commenters have also argued that issuing a remedy for a patent owner that has breached its FRAND obligation would result in patent hold-up, undermine SSOs, and thereby harm competitive conditions in the U.S. economy and U.S. consumers. Whatever the merits of such arguments, they are inapt to the facts of this investigation. As we have determined above, Apple has not proved that Samsung violated a FRAND obligation, and Samsung has widely licensed the '348 patent. We need not decide here whether some future investigation showing evidence of patent hold-up or of harm to SSOs would require a different analysis

The judge in the Moto vs MS case just ruled that injunctions on SEP are allowed.

As discussed above, in certain circumstances seeking injunctive relief may constitute a breach of the RAND commitment, whereas in other circumstances such conduct may be proper.

Quoting you:

The administration is preventing a situation that would have been overturned in court anyways. SEP's only mean that Apple would be obliged to pay for the patents if found to be infringing, there is no way Samsung can prevent them from using such patents as they are licensed under FRAND terms.

Qualcomm is on record stating that the patent, while part of a standard, isn't essential. It merely enhances it. Apple could live without it.

As stated above, apple wouldn't pay unless it made Samsung spend money on litigation to force them otherwise.

The administrations only recourse for overturning an ITC decision is for "public policy." The public isn't harmed by apple not being able to abuse a patent it doesn't feel like paying.

RE: Stretching it a bit?
By Reflex on 8/28/13, Rating: -1
RE: Stretching it a bit?
By sprockkets on 8/28/2013 9:44:18 AM , Rating: 5
The Judge in the Moto vs MS case pointed out that in other circumstances it *may* be proper, but this circumstance is remarkably similar to the Moto vs MS one.

Actually he's leaving it up to the jury to decide on the facts as MS decided to sue Motorola 14 days after offering an FRAND rate and they went straight to ITC bans.

As for the rest, you are already misrepresenting the judge and the law. This would not have stood in any court, and that is the reason the administration overruled it.

Like apple you are choosing to only see the side of the coin that benefits you. Unfortunately the facts of the case say otherwise.

RE: Stretching it a bit?
By Reflex on 8/28/2013 2:38:56 PM , Rating: 1
If only I was an Apple fan....oh wait, I'm not. But you know that, you've sparred with me on this topic on Ars for years and your just as fanatical as you always were.

RE: Stretching it a bit?
By ritualm on 8/30/2013 3:40:40 AM , Rating: 2
What a load of bullcrap.

Your position all along has been "Apple is right, everyone else is wrong, Apple can dictate the market how it wants and everyone else can suck off Cupertino's left nut".

In even simpler words: you are testerguy's second account.

Keep 'em comin', son.

RE: Stretching it a bit?
By retrospooty on 8/30/2013 10:39:30 AM , Rating: 2
"In even simpler words: you are testerguy's second account."

Similar MO, but he would have to crank up the aggression, condescension, conceit, and insults about 3x to be in Tester league.

"Game reviewers fought each other to write the most glowing coverage possible for the powerhouse Sony, MS systems. Reviewers flipped coins to see who would review the Nintendo Wii. The losers got stuck with the job." -- Andy Marken

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