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Judge took issue with Apple's refusal to assign a reasonable licensing value to patents

Apple, Inc. (AAPL) had a dream.  In its dream it no longer had to compete with Google Inc.'s (GOOG).  Instead it resorted to "thermonuclear war" with Android, gaining sales bans and suing Android device makers with damage claims so exorbitant that licensing was a non-option.

But it's looking increasingly like Apple's dream is but a fantasy, as the U.S. federal court system, like its peers, are growing tired of the company's legal crusade.

I. Great Expectations for Apple

Judge Richard A. Posner, a Seventh Circuit Court of Appeals judge who moonlighted in the U.S. District Court, Northern District of Illinois (Chicago), tossed Apple and Motorola Mobility's (a Google Inc. (GOOGsubsidiarysuits/countersuits out of court "with prejudice" during the first week of June.  He was upset about both companies' refusal to place realistic evaluations of their patents' worth (both companies reportedly lofted astronomical figures).

It was Motorola who originally initiated this suit, but it was essentially just committing to a preemptive strike after CEO Steve Jobs and Apple lawyers verbally threatened to sue it in late 2010.  During the month of October 2010 Motorola dropped the hammer and Apple followed in suit with its promised infringement lawsuit.

Northern District Court
The legal war was waged in Chicago court. [Image Source: Flickr/pobrecito33]

By 2011, Apple was growing eager with anticipation.  Motorola was facing scrutiny, as its lawsuit was founded on fair, reasonable, and non-discriminatory (FRAND) standards patents.  Motorola's decision to sue using FRAND IP had already provoked complaints from Apple and Microsoft Corp. (MSFT).

By contrast, Apple's patents were non-FRAND and carried fewer licensing restrictions.

Apple perceived this as an opportunity to demand essentially infinite damages, leading to a complete ban on current handset models and forcing Motorola, et al. to scrap key features that seemingly overlapped with Apple's massive software patent portfolio.  Paid critics of Google, such as Florian Mueller, eagerly salivated at Android's impending doom after it was "neutered" by Apple patent lawsuits.

Motorola's lawyers fought fire with fire, also requesting massive damages, despite realizing that their patents FRAND status made those damages even more risky.

II. Case Dismissed, Again

In the end Judge Posner rebuked both companies for this approach, dismissing the case.  The dismissal was a blow to Google's defense efforts, but was a far bigger blow to Apple's offensive efforts.  For that reason it was Apple who petitioned Judge Posner to reconsider, pleading for additional hearings to present revised arguments.

But those hearings came and went and Judge Posner has yet again dismissed the case with stinging words for Apple.

He comments in his ruling, "No more can Apple be permitted to force a trial in federal court the sole outcome of which would be an award of $1."

Judge Richard Posner
Judge Richard Posner was not happy with Apple. [Image Source: Abel Uribe, Chicago Tribune]

There would be no injunctions he added -- for either side.  They would simply have to compete on the free market, seeing as they could not be reasonable with their requests in court.

He comments, "Both parties have deep pockets.  And neither has acknowledged that damages for the infringement of its patents could not be estimated with tolerable certainty."

6.22 Opinion


III. Begrudging Apple Forced to Compete

Apple has seen its anti-Android legal blitzkrieg sputter to a crawl in recent months.  HTC Corp. (TPE:2498) successfully implemented a workaround allowing its handsets to skirt a sales ban based on "data-tapping" -- converting phone numbers or addresses to actionable links.

Meanwhile, Apple's efforts to ban Samsung Electronics Comp., Ltd.'s (KSC:005930) flagship Galaxy S III phone failed in U.S. District Court for the Northern District of California (San Jose/San Francisco).  Judge Lucy Koh, like Judge Posner, admonished Apple's zealous legal team.  She accused them of trying to monopolize her time, commenting, "I cannot be a [full time] Apple v. Samsung judge."

In the Chicago Motorola case part of Judge Posner's frustration stemmed from the fact that Apple complained at virtually every single stage -- even after he had handed them apparent victories.  Apple now is stuck between a rock and a hard place, as if it tries to appeal the ruling, the appeal will likely go to the same circuit appeals court that Judge Posner sits on.

Droid RAZR MAXX
Motorola's Razr MAXX will face no sales bans. [Image Source: Verizon Wireless]

The failure of its lawsuits is a very dangerous dilemma for Apple.  A sales ban could help preserve Apple's strong position amid a period where it has made no bold or decisive moves.

Following the illness and death of Steve Jobs in 2011, Apple's iPhones have seen slipping release schedules.  The iPhone 4S did not land until October 2011, while this year's sixth generation model has yet to be even announced.  This slippage stands in contrast to the reign of Jobs in which an iPhone was announced like clockwork each June and launched by late June (with the exception of the iPhone 3GS which launched in early July).

Likewise, after bold steps in terms of interface in early builds, Apple has since stalled. IOS 6 has suffered from bugs in test builds and lags behind Android 4.0 Ice Cream Sandwich and Windows Phone 8 in GUI design.  Apple is trying to spin its lack of refinements as sticking with "simplicity", but amid these attractive competitors it's looking increasingly demure and dated.
 
Apple iPhone
Product progress at Apple has slowed following the passing of Apple CEO/co-founder Steve Jobs
[Source: 
David Paul Morris/Getty Images]

In short, the trainwreck of its legal efforts against Android couldn't come at a worse possible time for the iPhone's market hopes.

Source: Scribd



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What Jason did not say....
By Shadowself on 6/25/2012 2:46:40 PM , Rating: 2
Yes, the judge very rightly smacked Apple. However, he did not say Apple did not have any case at all. He said Apple failed to show it was being damaged in any way that could provide for a judgement.

Conversely, and something I didn't see in the story Jason is telling, the judge did say that if the case had gone to trial he would have killed Motorola's (Google's) suit outright as he felt Motorola did not have a case at all.

So the bottom line (according to Posner) is Apple *might* have had a case but screwed it up so completely that the judge had to throw it out because the legal team messed up so badly that Apple would never have been awarded a dime even if they won at trial AND Motorola never had a case at all.




RE: What Jason did not say....
By retrospooty on 6/25/2012 2:52:24 PM , Rating: 5
The end result is a good one, for both sides. Stop overvaluing and suing over these vague patents. The end result will get you no-where.


RE: What Jason did not say....
By WalksTheWalk on 6/25/2012 3:05:59 PM , Rating: 2
Agreed. This needed to happen, although I don't think the shit's going back in the horse at this point.


RE: What Jason did not say....
By bug77 on 6/25/2012 4:14:49 PM , Rating: 3
Shoulda, woulda, coulda.

What I'm waiting for is for Tony to explain us how Apple never really wanted to win this lawsuit and such.


RE: What Jason did not say....
By ritualm on 6/25/2012 4:29:09 PM , Rating: 2
Why wait? Tony is going bananas over Microsoft Surface right now.


RE: What Jason did not say....
By Shadowself on 6/25/12, Rating: 0
RE: What Jason did not say....
By BillyBatson on 6/26/2012 6:49:11 PM , Rating: 2
What was the point of this comment? To randomly flame against tony? Talk about encouraging him.... Your comment is useless and childish. Stick to the topic jeez


RE: What Jason did not say....
By JasonMick (blog) on 6/25/2012 5:13:39 PM , Rating: 1
quote:
Conversely, and something I didn't see in the story Jason is telling, the judge did say that if the case had gone to trial he would have killed Motorola's (Google's) suit outright as he felt Motorola did not have a case at all.
No I explicitly explain in early paragraphs that Apple's case was seemingly stronger than Motorola's due to it being based on non-FRAND IP. I also linked to past stories in which Judge Posner said precisely that.

I don't think I was being disingeneous when I didn't repeat every single point Judge Posner made, particular when those points merely recap/reiterate points he already raised in past filings which I wrote about in detail and link to.

Don't you think the story was long enough, as is?? :)
quote:
So the bottom line (according to Posner) is Apple *might* have had a case but screwed it up so completely that the judge had to throw it out because the legal team messed up so badly that Apple would never have been awarded a dime even if they won at trial AND Motorola never had a case at all.
I agree here, not sure why you were downrated, although I disagree on the basic premise of your comment that I left out that point.
quote:
Yes, the judge very rightly smacked Apple. However, he did not say Apple did not have any case at all. He said Apple failed to show it was being damaged in any way that could provide for a judgement.
No, as I said in the piece, he took issue with Apple's refusal to come to reasonable/appropriate damages.

I think we both agree on this, you just didn't like something with the wording. Regardless, good news for the free market, I/we say, eh?


RE: What Jason did not say....
By Khato on 6/25/2012 5:36:53 PM , Rating: 3
quote:
No, as I said in the piece, he took issue with Apple's refusal to come to reasonable/appropriate damages.

Precisely. Roughly the first 2/3 of the opinion is primarily the justification for the ruling, it's the last third that actually sheds light on the root of the issue. Namely that Apple is attempting leverage its patents to gain an injunction to harm its competition for more than the value of the infringement rather than seek reasonable relief.


RE: What Jason did not say....
By dark matter on 6/26/2012 2:37:17 AM , Rating: 2
Apple never had a case not because their legal time messed things up, but because they were using unlicensed technology without paying for it because they assumed that FRAND would cover them.

Look, if you don't agree with the car rentals terms, does that give you the right to just hop in one and drive it around? And your excuse when stopped by the police, well, you didn't think the car rentals terms were fair, and they have signed a policy claiming they would be fair.

Doesn't work, does it.


RE: What Jason did not say....
By darkhawk1980 on 6/26/2012 7:34:49 AM , Rating: 2
You're also assuming that it was the legal team that messed it up, and not Apple themselves. Apple doesn't want Android to continue, and the article clearly points out that Apple wanted large amounts of cash for licensing patents, so much so that it was ridiculous. Bear in mind, I realize Motorola did the same thing for their FRAND patents, but they fully knew they wouldn't get it. A stalemate in this case is still a win for Motorola.

I'd be willing to bet that had Apple made it a reasonable licensing fee, they would have won. And if they could have kept their damn mouths shut and not complained like the red headed step-child they are. Soon enough, Apple will be back to the 10% or less market share they deserve because people realize that there are better products around without a white fruity logo on them.


wrong picture
By chiguy2891 on 6/25/2012 2:51:55 PM , Rating: 5
the first picture is of the post office not the court




RE: wrong picture
By JasonMick (blog) on 6/25/2012 4:35:01 PM , Rating: 2
Fixed, thanks!


RE: wrong picture
By Samus on 6/26/2012 12:13:47 AM , Rating: 2
Traffic court is underground, I know it well :\


(?°?°)?? ???
By quiksilvr on 6/25/2012 2:09:01 PM , Rating: 1
The tables have turned. Free market will reign supreme.




RE: (?°?°)?? ???
By vXv on 6/25/2012 3:44:07 PM , Rating: 3
Lets hope other courts follow this. If a patent holder has to not only prove that the patent has been infringed but that the infringement actually caused damage trivial patents like "slide to unlock" might end up being useless.

I mean who goes to buy a phone based on the unlock screen? Having slide to unlock in a different smartphone would not cause Apple any damage (people are buying it for a different reason).

Also the whole "lets use FRAND patents as a weapon" should stop as well.

And the end result would be ... competing on the market .


RE: (?°?°)?? ???
By Shadowself on 6/25/2012 4:39:02 PM , Rating: 2
quote:
If a patent holder has to not only prove that the patent has been infringed but that the infringement actually caused damage...

This is the way it is always *supposed* to work. You have to have a case where 1) you are wronged AND 2) where relief of some kind can be provided based upon the damage wrought.

In a patent infringement case the supposed wrong is the infringement itself (you have to prove infringement in the first place). The relief is based upon some "damage" inflicted. If you can't show damage you can't get relief.

Unfortunately, the U.S. legal system has pretty much devolved into wanting to see who "wins", not about who's right or who's wrong so not only the lawyers but way too many judges want to watch the fight rather than do what is right.


RE: (?°?°)?? ???
By Solandri on 6/26/2012 3:09:12 PM , Rating: 2
quote:
Unfortunately, the U.S. legal system has pretty much devolved into wanting to see who "wins", not about who's right or who's wrong so not only the lawyers but way too many judges want to watch the fight rather than do what is right.

I'd say it's devolved even past that, to just bogging the other side down with legal fees until it cries Uncle and pays your licensing fee because it costs less than to defend yourself in court.

That's basically what happened to RIM in the NTP suit. NTP claimed they had a patent on email over cellular networks. RIM fought it, but the legal costs and uncertainty over the outcome were so depressing on the company that they ended up settling for over $600 million. Most of NTP's patents were eventually overturned (rightfully so - no patent should ever be as broad as "email over wireless" or "a cart propelled by a gasoline engine"), and the ones remaining were significantly scaled back (to where they no longer cover email over cell networks - basically what RIM paid for). Kinda makes you wonder how RIM would be faring today if they had had an extra $600 million in the bank to spend on R&D back in 2006.

The scary thing is that this isn't new. The auto industry went through the same thing in the early 1900s over the Selden patent, with pretty much the same result. The final appeals court narrowed the scope of the patent down to the technology for which it was originally granted (a Brayton engine). Most cars used Otto cycle engines, so weren't affected by the narrowed patent.
http://en.wikipedia.org/wiki/Association_of_Licens...


Apple and Links
By aurareturn on 6/25/2012 2:15:40 PM , Rating: 2
Jason, how long did it take you to add all those links to the texts?

That's a crazy effort.




RE: Apple and Links
By JasonMick (blog) on 6/25/2012 4:13:10 PM , Rating: 3
quote:
That's a crazy effort.
Usually the linking takes me 10 to 15 minutes. I know what I'm looking for, it's just a matter of finding it.

It is a bit of an art though. :)

I think it's worthwhile as it paints a richer story. My goal is to provide a sort of URL map of the topic at hand, including, but not limited to the ticker symbols of the parties involved, past stories we've done on it, and any official websites (e.g. university homepages, court homepages, justice bios, etc.).

I know some people just want plaintext, but I think overall the good outweighs the evil, hence why I invest the time.


RE: Apple and Links
By Mint on 6/25/2012 7:21:19 PM , Rating: 2
I, for one, appreciate the linking.

It's a little annoying when you link to very loosely related DT stories, however...


this tickles me inside
By chµck on 6/25/2012 2:04:02 PM , Rating: 5
hee hee hee
By retrospooty on 6/25/2012 2:03:47 PM , Rating: 2
hahahaha... thats all I can say =)

At least justice is served.




Jason should do stand up comedy
By Tony Swash on 6/26/12, Rating: 0
By BluntForceTrama on 6/26/2012 7:10:03 PM , Rating: 2
quote:
Apple will sell 50 million hand sets in the next holiday season

While you're forecasting how many suicides are you expecting?


By GotThumbs on 6/27/2012 10:32:06 AM , Rating: 2
It would be hard for Apple to actually show damages. For reasons already known to all. If a consumer wants an Apple product...they will buy one. For those consumers who don't.....they will buy either Android or Win. Apple is trying to eliminate consumer choice. Thats it in very simple terms.

You can't deny the fact that Apple restricts its HW, Software, content access. Try and use an IPAD without using Itunes. Try loading content without ITunes or going through an Apple Portal. You can't...unless you hack the device...which Apple legally challenged already. They DO not want you going anywhere else.

If you have an IProduct...I hope you enjoy it, but know that not everyone wants one.

Freedom of choice.... that's what is key in an open market.




"Mac OS X is like living in a farmhouse in the country with no locks, and Windows is living in a house with bars on the windows in the bad part of town." -- Charlie Miller














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