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German court rules Apple's FRAND licensing proposal is fair enough, would be illegal for Motorola to refuse

A German appeals court has handed Apple, Inc. (AAPL) a major victory this week, at the expense of pending Google Inc. (GOOG) acquisition Motorola Mobility.  The Karlsruhe Higher Regional Court ("Oberlandesgericht Karlsruhe") elected to stay a preliminary injunction by the lower Mannheim Court, an injunction which could have -- at least online -- banned sales of iPhones and iPads in Germany.

I. iPad, iPhone Ban Would be Illegal Says Appeals Court

To understand the ruling you have to understand German patent law.  In the European Union, different member states have different patent court systems, despite sharing a single unified intellectual property registrar.

In Germany, lower federal courts launch cases along two separate tracks -- an infringement track, and a validity track.  The infringement track can ban (via preliminary injunction) a product or service, even if there's a modest prospect that a patent is invalid.  The infringement proceedings are typically only stayed by a lower court if there is a "high likelihood" (70-80 percent) of invalidity.

By contrast, German federal appeals courts can stay the infringement proceedings (and potential product bans) if there's a modest (think 50 percent or greater) chance of invalidity.

In this particular case, the infringement track was paused due to a special type of invalidity concern -- invalidity not based on the patent being invalid, but invalidity based on it being illegal to litigate with the patent under current licensing rules.

Apple store in Germany
German authorities have ruled that it would be illegal for Motorola to seek a sales ban on the iPhone and iPad, given Apple's relatively fair licensing proposal. (Pictured: Munich's Apple store) [Image Source: Apple Insider]

The Karlsruhe court ruled that Apple's latest licensing proposal was fair and reasonable enough that Motorola was legally obligated to license the patent to its rival.  The key point in the case was that the patents in the case (which Apple was found to infringe by lacking a license) were 3G standards patents governed by fair, reasonable, and non-discriminatory (FRAND) licensing terms.

Motorola made it clear it had a lot of issues with Apple's licensing proposal, and for a time the appeals court appeared to be on its side.  But via an "iterative approach", Apple crafted a licensing proposal, which was the appeals court felt was fair enough, according to FOSS Patents.  To refuse to license under the terms of that revised offer would be a clear antitrust violation, the German appeals court stated.

A translated ruling is available here.

II. Growing Headaches for Motorola, Google

Some experts (such as FOSS Patents blogger Florian Mueller) are saying that this loss is especially painful for Google/Motorola as the German court system is relatively friendly to FRAND patent holders using the standards patents to litigate against other FRAND standards holders.  

As Apple is also involved in some FRAND patents, the German court was more receptive to Motorola's claims that other international courts might be; a perspective originally praised by Google.

Cell tower
Motorola Mobility's efforts to litigate with 3G FRAND patents aren't working out very well.
[Image Source: Trak]

The loss adds to the cloud floating over Motorola and Google, as a European Union probe into potential FRAND patent abuse continues.  Motorola is fighting a two-front war against Apple and Microsoft Corp. (MSFT).  Last week Microsoft filed an EU complaint against Motorola, claiming it was committing antitrust violations by refusing to license certain FRAND patents.

III. Battle is Far From Over

While Motorola's litigious efforts against Apple are significantly weakened by the ruling, all is not lost for the phonemaker.  Motorola has a non-FRAND ban on the iCloud's push email in Germany, which is likely to be enforced for at least a year until the appeal is heard.  Unlike the iPhone/iPad ban, the appeal is unlikely to be expedited as the case does not share the same compelling FRAND questions.

Motorola's smartphones could be banned by April if it does not adopt a new unlock mechanism, following a German judge's decision that Motorola's lock graphic violated Apple's pair of patents [1][2] on a swipe unlock.  Motorola stands a good chance of getting this overturned at the appeals level, given the amount of prior art.  Such prior art was used to toss out similar claims in the Netherlands, where invalidity and infringement proceedings are lumped together into a single track.

Motorola unlock
Motorola's forbidden swipe to unlock gesture [Image Source: YouTube]

However, like Apple with the iCloud ban, Motorola must likely wait almost a year to get the decision tossed, as it is a non-FRAND issue.  Motorola will likely be forced to implement alternative unlock gestures.  Samsung Electronic Comp., Ltd. (KS:005930) -- threatened with a similar German ban -- has already done this, putting in place a circular slide to unlock motion.  

While the new unlock is clunky, it is likely to prevent Apple from being able to ban the company's products from the market, and may have the added perk of encouraging customers to use Android's more secure built-in Grid Unlock (which was not found to be infringement in Germany to date).

In the long run it's anybody's guess what could happen in Germany.  An appeal could allow Motorola to (re)enforce its FRAND-based iPad/iPhone ban, if the first appeals court decision is overturned.  Motorola could even invalidate Apple's swipe-to-unlock IP.  Alternatively, Motorola could see its iCloud victory nullified and be forced to maintain painful user interface changes, should things go wholesale in Apple's favor.

Sources: FOSS Patents [1], [2]



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This article is over a month old, voting and posting comments is disabled

How is Samung's unlock 'clunky'?
By Johnmcl7 on 2/27/2012 7:40:43 PM , Rating: 2
I don't see how swiping a different direction across the screen is 'clunky' as I find it more convenient.

John




RE: How is Samung's unlock 'clunky'?
By JasonMick (blog) on 2/28/2012 12:18:30 AM , Rating: 2
quote:
I don't see how swiping a different direction across the screen is 'clunky' as I find it more convenient.

John

The article is not referring to the traditonal swipe unlock, it's referring to the spiral-based unlock that Samsung replaced it with exclusively in Germany, due to the lawsuit concerns.

Many people have commented that the spiral unlock is clunky. It's not one direction, you have to drag your finger in a circle, and it's rather sensitive according to some users, hence it creates some headaches/inconvenience vs. a straight swipe.


RE: How is Samung's unlock 'clunky'?
By Ticholo on 2/28/2012 2:23:59 AM , Rating: 3
That swipe thing is completely idiotic.
Next thing you know you'll only be able to unlock your phone by swiping your finger in an exact 264º arc. Then the next company that comes along will have a 265º arc and so on.

I'll buy an iPhone if apple makes it unlock by showing it my middle finger. How about that?


RE: How is Samung's unlock 'clunky'?
By testerguy on 2/28/2012 3:33:48 AM , Rating: 2
While I agree with you that perhaps slide-to-unlock being patentable is a little far - I think you should wait until the court judges the validity of said patent.

If the patent is found to have 'prior art' or to be 'obvious' - it will be invalidated and your scenario wont exist.

If the patent is found to be valid - then your scenario will exist, but I would suggest that your argument should be with the patent and legal system, rather than Apple.

All companies will try to protect whatever they can, to whatever extent they can. It's up to the courts and legal system to draw the line in the sand. If the line is drawn on the wrong side of the slide-to-unlock debate, in your eyes, it's the fault of the system, not Apple.


RE: How is Samung's unlock 'clunky'?
By JPForums on 2/28/2012 9:08:29 AM , Rating: 2
quote:
If the patent is found to be valid - then your scenario will exist, but I would suggest that your argument should be with the patent and legal system, rather than Apple.

I would indeed have a disagreement with the German legal system if the patent is ruled valid.

However, regardless of ruling I still take issue with Apple submitting patent proposals on something that someone else came up with, and furthermore, already has patents on it. Such actions are costly to the court system and the companies under attack.

quote:
All companies will try to protect whatever they can, to whatever extent they can.

I've never found the "Everyone does it" argument to be particularly compelling, even if it is true. Though, I find it entirely unlikely that Apples legal counsel didn't know about the prior art. As such, the patent in question seems more like a way to inflict short term damage on competitors through injunctions and legal costs. Apple has far more cash on hand for these court cases than their competitors.

That said, I find this articles topic, FRAND abuse, a far more grievous concern , so let's evaluate that for a moment. Motorola offers licenses to everyone, including Apple, so the point of contention is "fair" and "non-discriminatory".

As I understand it, Motorola is licensing its IP at the same rate (2.25%) as it does for everyone else. So not discriminatory.

"Fair" is harder to be concrete about. However, I'd imagine that if they were being unfair, more that one company would find it as such. I can think of two (in addition to Apple) right off the bat. Of all companies, Microsoft agrees with Apple on this and have filed their own complaint against Motorola regarding FRAND patent abuse. Qualcomm, while letting Apple do most the talking, has license contracts with Motorola in place that protects its clients from litigation while using its baseband chips covered under the license. It would be hugely damaging to Qualcomm's business if their baseband customers had to enter into licensing agreements with Motorola to use their chips. Motorola's case smells more foul than "Fair" to me.


RE: How is Samung's unlock 'clunky'?
By testerguy on 2/28/2012 11:27:19 AM , Rating: 2
Thanks for the logical, reasoned approach.

quote:
However, regardless of ruling I still take issue with Apple submitting patent proposals on something that someone else came up with, and furthermore, already has patents on it. Such actions are costly to the court system and the companies under attack.


I think this is a little disingenuous. You state 'someone else came up with' as if that is a matter of fact. Even if that is what you believe, it isn't necessarily what Apple believes. Their patent is technically different in a number of ways, and while I agree that the Neonode raises the question of prior art - it doesn't provide a conclusive answer. If Apple honestly believed their patent was no different, they would not believe it would ever stand up in court - so there would be no point. They obviously believed it was different enough to be patented. To put it into perspective, the 'swipe' on the Neonode in the patent itself wasn't even for 'unlocking' - it was for going forward OR back.

quote:
I've never found the "Everyone does it" argument to be particularly compelling, even if it is true. Though, I find it entirely unlikely that Apples legal counsel didn't know about the prior art. As such, the patent in question seems more like a way to inflict short term damage on competitors through injunctions and legal costs. Apple has far more cash on hand for these court cases than their competitors.


I think 'Every company does it' is a compelling argument. You have to bear in mind that companies are not human entities - they do not necessarily adhere to 'morals' except where doing so increases profit. It is almost their duty to maximise the income from their intellectual property such as patents, and they have to work off the assumption that their competitors will do the same - legally, of course. Indeed, 'legally' is the company equivalent of human 'morals'. Your claim of a 'short term' aim when referring to a patent filed 7 years ago with no knowledge of what would happen in subsequent years would appear contradictory (and in your post you clearly object to the patent itself). They wouldn't file a patent if they never believed they would or could need to protect it - and that it would mean something. Since no devices are yet banned, and since this 'swipe to unlock' patent war has caused a bit of PR damage for Apple, I don't think they are doing it just for the sake of legal costs or 'short term damage' - all the companies in question can handle the legal costs since they have in-house legal teams anyway, and no actual damage has been done yet. What Apple is doing, arguably, is allowing their own patent every chance to realise its full value. It's down to the legal system to define what that value is.

I think you have to understand that since the iPhone from 2007 was basically the genesis behind every smartphone you see today, Apple feel a little aggrieved that everyone else duplicated what they believed was a protected idea. In the launch speech in Jan 2007, Steve Jobs even said they had filed over 200 patents during the development of the device - they were so happy with it they basically tried to make sure nobody could copy it. What we see today is just them following through with that (clearly unsuccessfully). I don't mind them doing that - and I don't care whether they are successful or not - Motorola and Samsung can handle it, and the law gets to decide on things like 'prior art' (rather than me or you).

quote:
That said, I find this articles topic, FRAND abuse, a far more grievous concern , so let's evaluate that for a moment. Motorola offers licenses to everyone, including Apple, so the point of contention is "fair" and "non-discriminatory". As I understand it, Motorola is licensing its IP at the same rate (2.25%) as it does for everyone else. So not discriminatory.


I agree, FRAND abuse is far worse. The key in the FRAND case here is that the licensing has to go back historically as well as forwards. Apple offered Motorola FRAND rates for both, but Motorola refused. They claimed that because the licensing was historical, they should be entitled to what even they admit are above FRAND rates - as a kind of penalty for being late. This, I can see and actually agree with (provided the penalties are also reasonable). However, they went a step further, and refused to license at what everybody agreed was FRAND rates going forward - because the issue of historical payment had not been resolved (due to their ridiculous demands). This is where the FRAND abuse kicks in. What Apple did was make sure that they offered enough that it was clearly reasonable, but not anywhere near the penalties Motorola wanted. The court has decided that the offer Apple made going backwards and forward is indeed Fair and Reasonable, and therefore Motorola can't refuse to license the technology and consequently have the devices banned.

The correct decision all round, IMO.


By JPForums on 2/28/2012 1:42:23 PM , Rating: 2
quote:
I think this is a little disingenuous. You state 'someone else came up with' as if that is a matter of fact. Even if that is what you believe, it isn't necessarily what Apple believes.

Sorry I wasn't more clear with that. Let me correct that: I still take issue with Apple submitting patent proposals on something that in my opinion someone else came up with, and furthermore, already has patents on it. Though to be fair, the existing patents are fact and the technical differences weren't enough win them a previous case. So I'm not entirely alone in that opinion.

quote:
I think 'Every company does it' is a compelling argument. You have to bear in mind that companies are not human entities - they do not necessarily adhere to 'morals' except where doing so increases profit. It is almost their duty to maximise the income from their intellectual property such as patents, and they have to work off the assumption that their competitors will do the same - legally, of course.

I hadn't really though of it that way, so I'll have to think it over some. Though, I'm guessing avoiding (too much) bad PR would be a reason to adhere to 'morals'.

quote:
Your claim of a 'short term' aim when referring to a patent filed 7 years ago with no knowledge of what would happen in subsequent years would appear contradictory

In this context I (apparently incorrectly) thought it would be clear that I was talking about the current usage of said patent. Also, the only thing I said was short term was the damages. Even if Apple's legal department and I disagree on the validity of the patent, I don't think they'd disagree that this patent is not as strong than many of their other patents. They know better than me their chances of winning and that the competition will work around it if they do win. Hence, my usage of the term "short term damage".

quote:
all the companies in question can handle the legal costs since they have in-house legal teams anyway, and no actual damage has been done yet.

Injunctions are damaging. Even if compensated monetarily, mind/market share loss is still a concern. Whether Apple's injunctions are successful or not has no bearing on their intent to get them. Of course, they are well within their legal rights to do so.

quote:
What Apple is doing, arguably, is allowing their own patent every chance to realize its full value.

Absolutely. They probably wouldn't litigate if there was no chance at winning. The question is at what point does Apple decide the chances are too low to justify the cost. My guess is that their ability to get injunctions has some bearing on this.

quote:
Apple feel a little aggrieved that everyone else duplicated what they believed was a protected idea.

Good point.

Regarding the Motorola FRAND issues, I believe we're mostly on the same page.

Thanks for the logical discussion.


By CBeck113 on 2/28/2012 7:27:35 AM , Rating: 2
It's not clunky in any way. Basically there's no specific starting point. Where ever you touch the screen is the middle of a circle (and start point), and you have to slide your finger past a second, concentric circle. If clunky means "I don't know where to start", then OK, but that happens once - the first time you use it.
On the same note, they were forced to change the pick up and reject call functions as well, because they also used a predetermined linear path to activate. Now these are circular as well.

Servus, Charlie


RE: How is Samung's unlock 'clunky'?
By Gondor on 2/28/2012 4:13:38 AM , Rating: 3
As I suggested in a previous thread, they should have gonee with "two finger tap", first index then middlemiddle finger at two adjacent spots (~2 centimeters apart from each other), not very much unlike "grid unlock", but far easier to do (unless you're suffering from arthritis ?) and remember, plus it can be done with thumb alone if you only have one hand avaliable to hold and manipulate the phone.

Somebody should also patent this before some Appletroll does.


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