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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

RE: So...
By JasonMick (blog) on 2/28/2012 1:10:13 PM , Rating: 2
quote:
As for the patent system in general, I think I agree with your first sentence - the trivial 'swipe to unlock' stuff is distorting yours (and others) perspective on this case which has nothing to do with 'swipe to unlock'. I think you are expressing your grievance over an unrelated case and confusing it as having any relation to this case. In my opinion the court did exactly the right thing here, and Motorola can have no complaints whatsoever.

Testerguy, first let me say we don't usually agree thus far in the comments you've left here. But I do agree with you about FRAND.

FRAND is a good concept in principal. And Germany is right not to let Samsung or Motorola abuse essential standards.

That said, your dismissal of the op's point is not valid, as Apple's gesture/UI driven lawsuits DO impact the court system. Motorola/Samsung/Google would never be trying to sue Apple/Microsoft if it weren't for the hyperlitigious atmosphere where companies either demand a king's ransom (Microsoft) or try to ban your products (Apple).

In reality there should be some element of value added to the patent system. For example, I have no real issue with Apple patenting UI gestures, but clearly their gestures are
a)based on a wealth on prior art
b)represent only a fraction of the combined value eqn. for Apple's products.

Given these factors, Apple should be allowed to sue and demand licensing, but the settlement should be maybe an order of magnitude higher than FRAND.

For example a collection of FRAND patents is oft licensed for $0.02 per device. This is very reasonable.

It would be also reasonable to allow Apple to sue and potentially win a mandatory licensing settlement of $0.20. (10x premium over FRAND)

What I don't see as fair is Apple suing over a relatively minor piece of intellectual property and potentially banning a $200 product.

This represents a 10,000x premium versus the FRAND licensing!!!!

This is clear evidence that the system is indeed broken, as the op stated.

UI gestures/speech inputs, etc. are ubiquitous and critical to the industry progressing. I can see possibly allowing this kind of IP to be filed as non-FRAND patents, but allowing such extreme abuses is just anti-technology.


RE: So...
By adiposity on 2/28/2012 3:24:58 PM , Rating: 2
quote:
For example a collection of FRAND patents is oft licensed for $0.02 per device. This is very reasonable. It would be also reasonable to allow Apple to sue and potentially win a mandatory licensing settlement of $0.20. (10x premium over FRAND) What I don't see as fair is Apple suing over a relatively minor piece of intellectual property and potentially banning a $200 product. This represents a 10,000x premium versus the FRAND licensing!!!!


Jason, while you make some good points, I really don't see how you can compare the cost of the licensing to the cost of the product. There is no direct comparison between the license cost and the retail price of a device, and banning a $200 device is not the same as requiring $200 is licensing fees. It is simply banning the device until it is not violating patents.

Now I don't agree with Apple's suing, but you are comparing two totally different numbers and then trying to calculate a ratio which is meaningless. There is no ratio known as "the retail price divided by the license cost of one patent" that can calculate your "10,000x premium."

If anything the cost of a phone vs. the price minus the cost minus the licensing might be compared. Then you could see what the total amount lost might be for getting banned vs. licensing. While it would be interesting, it would not be any kind of "premium," because the money doesn't go to Apple! It's just inability to sell the product.


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