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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.

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
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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(?°?°)?? ???
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
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
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.

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