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Appeals court ruling offers Microsoft a key win in its legal battle against Android

Microsoft Corp. (MSFT) appears to have dodged a major bullet in its legal battle against Android operating system maker Google Inc. (GOOG).

I. German Windows Ban Dealt a Deathblow

While most Android OEMs have caved to Microsoft's licensing demands, Google vowed to fight back.  It has been using its $12.5B USD acquisition -- patent-rich Motorola Mobility -- as a key tool in that battle.  

A win would likely free Motorola's fellow Android OEMs from licensing fees, while a loss would mean that Google would be forced to accept that part of the revenue from every Android phone sold go to Microsoft (typically, $10 or more per phone).

Motorola was seemingly on the verge of a major win, thanks to a German court's decision to ban the Xbox 360 and certain versions of Windows for possibly infringing on Motorola's patents.  However, that ban was called into question when U.S. District Court for the Western District of Washington Judge James Robart -- a judge in Microsoft's home state -- ordered that it would be illegal for Google to enforce the ban in Germany.

Google on Motorola
A judge has blocked Google from banning Microsoft products in Germany via Motorola.
[Image Source: TechnoBuffalo]
 
Now, a panel at the 9th U.S. Circuit Court of Appeals in San Francisco has upheld that ruling, commenting, "At bottom, this case is a private dispute under Washington state contract law between two U.S. corporations."

II. Microsoft Can Ban Motorola, but Motorola Can't Ban Microsoft: Fair?

The message is that Google/Motorola cannot fight their war by proxy in Germany, a nation with a reputation for "banning first, asking questions later."

But the ruling also raises certain questions, as it did not prohibit Microsoft from enforcing its own German ban on Motorola's products.  Much like Motorola, Microsoft secured the ban from a German court months ago.  As a result Motorola's Android handset stock in the German nation may soon be taken to disposal locations and destroyed.

While it may seem puzzling how a U.S. court can prevent a German court from banning products, it can effectively do so as Motorola resides in the U.S. and could face fines and other penalties if it refuses to comply.  Thus U.S. courts can in roundabout fashion prevent foreign court rulings, when the ruling is made in favor of a domestic company and the American court opposes it.

Motorola h.264
Motorola's German suit involved two patents covering the h.264 codec. [Image Source: Joker Blog]

The now-defunct German ruling was based on a pair of h.264 patents -- EP0538667, a patent on an "adaptive motion compensation using a plurality of motion compensators" (filed in 1992), and EP0615384 a patent on an "adaptive compression of digital video data" (filed in 1994).  As these are standards patents, Motorola may face additional punishments following an antitrust investigation by EU inquisitors regarding FRAND licensing abuses (as Motorola potentially should not have been able to sue with the patents).

Source: NBC News



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Opening a can of worms.
By drycrust3 on 10/1/2012 3:17:33 PM , Rating: 2
quote:
While it may seem puzzling how a U.S. court can prevent a German court from banning products, it can effectively do so as Motorola resides in the U.S. and could face fines and other penalties if it refuses to comply.

This is a very interesting case. Effectively a US District Court has decided it can tell a US based corporation how a foreign subsidiary will behave.
So what next? What if a Russian Mafia corporate that earns millions from malware gets a ban in their "impartial" local court on Microsoft plugging the holes in the Windows operating sytem they use to extort money from users: Is the US District court going to direct Microsoft, Firefox, Symantec, McAfee, etc, to stop employees putting in place fixes that block those holes?
Or what if a court in South Korea decides that Apple's "4 corners" patent isn't that clever, is a US District Court going to direct Apple to stop pursuing Samsung over this?




RE: Opening a can of worms.
By KPOM1 on 10/1/2012 3:35:32 PM , Rating: 4
The 9th Circuit ruling addresses those very issues. There's a principle called "comity" (essentially courts respecting the laws of foreign jurisdictions) that must be weighed before they will grant such a motion.

The issue here is that Motorola Mobility and Microsoft had a matter in federal court here that addressed the dispute (regarding licensing a portfolio of 100 patents). Only after that matter was filed here did Motorola Mobility file their claim in Germany over 2 specific patents. The district judge here ruled essentially that Motorola Mobility was doing an end-around of the U.S. court by trying to get an injunction in a foreign jurisdiction to render the case moot. It has nothing to do with the validity of the patent, or Motorola Mobility's ability to win damages from Microsoft from the German court.

At issue here is whether Microsoft has the right under Washington contract law to require Motorola Mobility to enter into a licensing agreement, since Motorola Mobility has entered into a contractual agreement with the ITU to license its patents on FRAND terms to all comers. Germany doesn't recognize third-party contract rights like that, but Washington (and state contract laws in general) do.


RE: Opening a can of worms.
By Solandri on 10/1/2012 8:38:59 PM , Rating: 2
quote:
The issue here is that Motorola Mobility and Microsoft had a matter in federal court here that addressed the dispute (regarding licensing a portfolio of 100 patents). Only after that matter was filed here did Motorola Mobility file their claim in Germany over 2 specific patents.

Are those US patents or EU patents they filed claims under in Germany? That would seem to me to be the crucial factor. Since the US and EU have different patent systems, Microsoft could be found guilty of infringement in the EU but cleared in the US.

What this decision seems to be saying is that foreign patents are irrelevant and non-binding for U.S. companies. Which makes no sense.


RE: Opening a can of worms.
By KPOM1 on 10/2/2012 12:14:08 AM , Rating: 3
They are German patents obtained pursuant to EU law. However, that's irrelevant to the case before the US court. Under common contract law in place in most states in the US, including Washington, there is a concept of a "third party beneficiary." I am not a lawyer, but as I understand it, essentially it means that a third party, in this case Microsoft, has the contractual right to enforce an agreement between two other parties (in this case Motorola Mobility and the ITU) from which the third party would benefit.

It boils down to this. Motorola Mobility entered into a binding agreement with the ITU that in exchange for the ITU incorporating its patented technology into a new standard, Motorola Mobility would grant worldwide licenses to that technology on FRAND terms. Microsoft is saying it wants to enter into a license on those FRAND terms. The court is adjudicating whether Microsoft has third party beneficiary rights, and if so, what those FRAND terms should be. They don't want Motorola Mobility doing an end-around by forum shopping in an important foreign market in an attempt to essentially blackmail Microsoft into accepting a settlement.

Think of it this way. What if, 5 years ago, Microsoft and Motorola Mobility entered into a 20 year agreement to cross-license all of their patents at set terms, and to adjudicate any disputes through binding arbitration in London. If a case were brought before a court, that court would likely rule that the parties needed to bring the case before the arbitrator as they agreed. They likely wouldn't take too kindly to an attempt by one of the parties to seek an injunction that would effectively overturn the intent of the contract.


RE: Opening a can of worms.
By cboath on 10/2/2012 8:43:27 AM , Rating: 3
You'd have a point if the case purely originated in Germany. It was tried here first, they lost or at least weren't winning and tried to go elsewhere to gave a favorable location to skirt the effects of the first case.

It's like asking your dad for permission to do something, then when he says no asking your mom who gives you permission. You get your way, but when you get home, your dad's at the door waiting for you and not in a good mood.


Fair, reasonable, and non discriminatory!
By michael2k on 10/1/2012 2:14:49 PM , Rating: 2
H.264 patents are covered by FRAND and it's been brought up multiple times in multiple cases that injunctions and bans are unsuitable weapons in just a patent battle when you can merely request arbitration to decide license fees.




RE: Fair, reasonable, and non discriminatory!
By kamiller422 on 10/1/2012 2:38:08 PM , Rating: 2
May not be as simple as that...

quote:
How Microsoft can refuse to negotiate and unilaterally decide that an opening offer is "unreasonable" when there is no ruler's edge and it's specifically left to the parties to work out, is the mystery in this picture. Meanwhile, Microsoft's using the Motorola patents and paying nothing to Motorola. Not one penny. Not one counteroffer that I know of.

It wants the courts to decide what is a fair price, which isn't the ITU procedure as I'm reading it, and it wants Motorola to be toothless in the face of a user of the patents who simply won't pay and won't even negotiate. And it wants the friendly local home court in Washington State to set the price for the whole world.

http://www.groklaw.net/article.php?story=201209301...


By KPOM1 on 10/1/2012 3:19:16 PM , Rating: 2
The ITU doesn't establish procedures for granting licenses, since that's a matter of local law. It just requires members whose patented technology gets incorporated into standards to license those patents on FRAND terms.

It's in the jurisdiction of federal court because Motorola Mobility and Microsoft are in different states.


By michael2k on 10/1/2012 3:48:39 PM , Rating: 2
I never said it was simple, I only said that was what multiple jurisdictions have been trending towards in multiple countries and in multiple cases.

Motorola is particularly toothless here, especially if Microsoft has already been grandfathered in as an MPEG-LA member. Microsoft is both a licensor and licensee of the H.264 patents so any claims Motorola may have has to go up against MPEG-LA as well as Microsoft.

If Motorola wishes to keep their patents out of the pool, which is their right, then they are also 10 years late given the pool covers members from 2002 forward.


Headline Not Quite Accurate
By KPOM1 on 10/1/2012 3:13:11 PM , Rating: 3
The U.S. Court isn't preventing the German court from doing anything, since it can't. What they are doing is preventing Motorola Mobility from taking action to enforce the court ruling they obtained in Germany because the U.S. judge believed Motorola Mobility went "forum shopping" in an attempt to end-around the U.S. court where Motorola Mobility and Microsoft had been arguing their cases. The issue isn't the validity of the patents in Germany. The issue is whether Microsoft can require Motorola Mobility to issue it a license to that technology under Washington state contract law.

U.S. court's don't issue these rulings at the drop of a hat. The ruling goes into a lot more detail as to their reasoning.




RE: Headline Not Quite Accurate
By JasonMick (blog) on 10/1/12, Rating: 0
RE: Headline Not Quite Accurate
By Insurgence on 10/1/2012 5:31:50 PM , Rating: 2
quote:
quote:
quote:
U.S. court's don't issue these rulings at the drop of a hat. The ruling goes into a lot more detail as to their reasoning.


And I'm sure detailed and complex reasoning went into the ruling that Samsung deliberately and flagrantly infringed on Apple, and now owes it $1B USD, right?

I'm sorry you can't have it both ways.


The differences are that the Moto vs MS trial was an Appeals Court, and not a trial by jury. Where as the Samsung vs Apple was not through an appeals court, while it was also left up to a jury to make the decision. Of which there is now controversy as to how they made that decision.

Appeals Courts also have a strong tendency to make decisions that lower courts may not make.


RE: Headline Not Quite Accurate
By KPOM1 on 10/1/2012 7:33:52 PM , Rating: 2
When did I even mention Apple v. Samsung? That isn't relevant to this case, which is Motorola Mobility vs. Microsoft. Apple v. Samsung was a jury trial regarding US patents in the US. They key issues were whether Apple and or Samsung had valid patents in the US, and whether the other parties infringed upon them. Juries in the US don't need to explain their rationale as they decide upon matters of fact.

The issue in the Microsoft/Motorola Mobility ruling was whether an American company could be prevented from taking action in a foreign court that would render moot a court case that is properly being decided in an American court. Microsoft's dispute with Motorola Mobility isn't about the validity or enforceability of German patents. It's about a contract dispute in the US. The ruling was a decision on an interlocutory appeal by a federal appeals court. Unlike juries, appellate courts need to justify their reasoning, which the decision clearly does.

You are the one trying to have it both ways.


By JasonMick (blog) on 10/2/2012 12:20:18 PM , Rating: 1
quote:
When did I even mention Apple v. Samsung?
You didn't; I did because it was relevant.
quote:
That isn't relevant to this case, which is Motorola Mobility vs. Microsoft. Apple v. Samsung was a jury trial regarding US patents in the US.
I would argue you are incorrect.

While this particular decision dealt with a different angle of the particular case, in both legal battles Microsoft v. Google/Samsung v. Apple the broad pieces of the case are nearly identical.

Explicitly, in both cases the key conflict is Android versus and established player, the key dispute is centered around U.S. patents, a side dispute is efforts to ban the other side's devices in Germany or other plaintiff-friendly jurisdictions, and where both sides are also seeking bans via the ITC as an alternate route.

If you look at the cases as a whole they are remarkably similar. And I believe when making decisions that affect a broad legal battle, the big picture must be considered. Hence the Apple v. Samsung case is, in my opinion, absolutely pertinent.

The only difference, which I feel is worth noting is that Microsoft's methodology is to force competitors into damaging license, to achieve an end goal of giving its products a competitive advantage. Apple's end goal (giving its products a competitive advantage) is identical, but its methodology for doing that is a bit more severe -- via seeking outright bans.
quote:
Unlike juries, appellate courts need to justify their reasoning, which the decision clearly does.
Correct, but remember in Apple v. Samsung, the individual who ultimately delivered the ruling was not the jury but the judge. The jury in civil litigation cases typically offers a guideline, which for damages and finding of guilt, which the judge TYPICALLY follows.

However, judges do have to justify their decision, and they can and sometimes do reverse the jury's verdict, if they feel the jury misunderstood the law. In both this case and Samsung v. Apple, it was a federal judge who made the initial decision, offering justification for their decision. It's true a jury was involved in the Apple v. Samsung case, but in both cases it was a judge who delivered the ruling.

In this case however, I would agree with you in a sense in that if an Appeals court upholds a ruling it MAY support its validity. However, it's foolish to wholly dismiss the possibility for bias/bad rulings from federal appeals courts and more than it is to dismiss the possibility or bias/bad rulings from federal district courts. The difference is just a relative improvement.


What a lame move
By BZDTemp on 10/1/2012 4:40:19 PM , Rating: 2
I have a hard time believing a court from Microsoft home state is not influenced by Microsoft being a local company.

Also I wonder why it up to Google to upheld something the German court has ruled on. I'd expect the public officials in Germany to take care of that. Or am I totally mistaken on that?




shooting own foot
By mosu on 10/1/12, Rating: -1
RE: shooting own foot
By Tony Swash on 10/1/2012 6:31:24 PM , Rating: 1
quote:
favor of parasitic software companies like MSFT and Apple is like shooting your own foot before you die of hunger.


What proportion of Apple's revenues and profits come from software and from hardware? Take a guess.


RE: shooting own foot
By mosu on 10/2/2012 7:15:24 AM , Rating: 2
hardware produced by Foxconn in China....


RE: shooting own foot
By Tony Swash on 10/2/2012 10:46:39 AM , Rating: 2
That still doesn't make Apple a software company you twit.

HP, Dell, Nokia, Cisco, Toshiba are all major Foxconn customers are they software companies?


RE: shooting own foot
By mosu on 10/2/2012 11:08:32 AM , Rating: 2
Apple's best product ever is hype and one might think this is software...for people.As always, it takes one(twit) to know one.Please do not offend the aforementioned companies.


RE: shooting own foot
By Tony Swash on 10/2/2012 11:35:42 AM , Rating: 2
quote:
Apple's best product ever is hype and one might think this is software


Only if you are on drugs.

When you are in a hole stop digging.


"It looks like the iPhone 4 might be their Vista, and I'm okay with that." -- Microsoft COO Kevin Turner














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