Apple v Samsung: This Time It’s Global

“The United States district court is a public institution, and the workings of litigation must be open to public view,” Justice Alsup wrote in an October order in Oracle America, Inc v. Google Inc. Yet this is not the approach of U.S. District Judge Lucy Koh and U.S. Magistrate Judge Paul Grewal, who have not only granted many of Apple and Samsung’s sealing motions, but in some cases have gone even further. During an October hearing on the proposed injunction, Koh was unprompted when she asked Apple and Samsung if they wanted to seal the courtroom.

This level of secrecy prevents academics, lawyers, and other curious bystanders from the cottage industry of prognosticating the results of the trial. Perhaps the best alternative is to look at the recent decision by the German courts applying EU law in an effort to draw some conclusions that could apply to the American ruling.

Writing on the Microsoft Antitrust prosecutions in the US and EU, John Jennings at Spencer Fane Britt & Browne LLP explains the difference between the two jurisdictions:

Although US antitrust law contains substantial parallels to its EU counterpart, the enforcement of these laws often differs in the two jurisdictions. EU antitrust law largely derives from Articles 81 and 82 of the EC Treaty. Article 81 prohibits cartels and “concerted practices” that distort competition, such as price fixing, production limits, and dividing market share. Article 82 prohibits dominant businesses from using their market share to leverage other markets, engaging in predatory pricing, excessive pricing, price discrimination and some forms of resale price maintenance, or generally abusing their market position. These Articles roughly comport with Sections 1 and 2 of the Sherman Act, respectively. While these provisions appear similar, most commentators acknowledge that US antitrust law aims to promote competition, while EU law attempts to protect competitors.

Indeed this dichotomy between protecting competitors in the EU and protecting competition in the US looks likely to apply to the current litigation involving Apple and Samsung over 3G/UMTS patents.

The EU Litigation

It is under Article 102 TFEU (ex Article 82 TEC, noted above) that the EU has begun investigations regarding Samsung’s licensing fees to Apple. The article reads,

Any abuse by one or more undertakings of a dominant position within the internal market or in a substantial part of it shall be prohibited as incompatible with the internal market in so far as it may affect trade between Member States.

Such abuse may, in particular, consist in:

(a) directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions;

(b) limiting production, markets or technical development to the prejudice of consumers;

(c) applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage;

(d) making the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts.

On February 3rd, 2012, the Mannheim Regional Court found Apple infringed a patent used to synchronize e-mail accounts. Presiding Judge Andreas Voss said in delivering the ruling. “The court has come to the conclusion that the wording of the patent does cover functioning that were at issue here,” said Voss. Apple “wasn’t able to convince the court that it isn’t infringing.” Yet just a few hours later, Apple was granted an injunction against the ruling based on the fact that the technology used by Samsung and Motorola were not being licensed to Apple at a reasonable rate.

Now the EU has launched a probe into Samsung’s licensing fees based on allegations that the company has violated FRAND (“Fair, Reasonable, and Non-Discriminatory”) terms of 1998 which dictate that participants undertake that their IPR, if incorporated into the standard, will be accessible on fair, reasonable and non- discriminatory terms and conditions. In essence, the FRAND commitment constitutes a restriction on the IPR holder’s ability to freely set royalties for the use of its IPR by third parties.

Apple alleged that Motorola repeatedly refused to license this patent to Apple on reasonable terms, despite having declared it an industry standard patent seven years ago. This injunction by the German court brings Samsung the unwanted attention of the European Commission on Antitrust as the legal battles between the two companies have heretofore dealt mostly with patent issues. This shift towards FRAND standards places Samsung and Motorola under the Commission microscope. Apple on the other hand, comes out relatively unscathed, as their patent issues do not fall under any FRAND-pledged standards.

The US Attitude

Samsung’s allegations of infringement have forced the Seoul-based tech giant to outline the technology they feel Apple has unfairly taken from them. However, in doing so they have also exposed the manner in which they license said technology.

Any antitrust holdings against Samsung and Motorola in the EU will likely have more serious consequences than private patent conflicts. When the Commission issued a decision on the Microsoft antitrust case in 2004 regarding their violation of Article 82, amongst other orders it fined the software company €497.2 million (~$650M CDN). While Samsung’s potential antitrust infringements will likely not garner such substantial fines – if indeed they are held to be in violation of FRAND agreements – it should be noted that the German courts have already ordered over €100 million bonds for injunction enforcement. The patent and antitrust issues are worth a great deal to both sides of the table, but the costs surrounding the antitrust issues in Europe should not be underestimated. In the US, on the other hand, a decidedly more pro-business attitude indicates a greater emphasis on the patent battle rather than antitrust issues.

The EU attitude, a result of zealous enforcement of antitrust laws by the former Competition Commissioner Mario Monti who served from 1999 until 2004, has not been mimicked on the other side of the Atlantic. Rather than a series of fines (and additional fines for noncompliance amounting to €2M per day as in the EU) the US approach focused more on negotiations between Microsoft and the Justice Department. Judge Kollar-Kotelly accepted nearly all elements of the November 2001 agreement and within 3 years, all other States had followed suit (with Massachusetts the final holdout until June of 2004). The agreement placed an emphasis on the user experience and most of the issues with Microsoft bundling its software were dealt with by giving purchasers to manually delete Microsoft software from their computers.

Conclusion

Ultimately this comparison between the EU and US approach to antitrust litigation may not give us any greater insight into the current litigation in California. However, using a broad-strokes application of the two jurisdiction’s attitudes it is likely that Apple and Samsung will reach a settlement in the US, and any antitrust issues will be dealt with by the parties making specific technological concessions. Of note in the US litigation will be whether Apple leverages Samsung’s potential Article 102 woes in the EU to gain greater traction as the two move towards that settlement. In doing so we may see the different attitudes create a sort of balance for multinational companies. But of course, with the shroud of secrecy that hangs over the US proceedings, that analysis will have to wait until the facts of the dispute are made public.

UPDATE: So what are reasonable licensing terms? Today the Wall Street Journal reports that Motorola is requesting approximately 2.25% in royalties from Apple, or about $1 billion for the iPhone manufacturer, likely as a way to force a settlement.

Who Gets Burned When the Dragon Stirs? – Ramifications of Stricter Patent Protection in China

Jameson Berkow in The National Post recently voiced a concern not unfamiliar to those who have seen the cover of any Economist magazine in the past eight years – the dangers of China’s evolving economy, in particular their approach to patent protection.

The article argues that, “China … has intentionally maintained a lax intellectual property enforcement regime for decades, waiting until its internal invention industry had become strong enough to warrant something more robust.” Read the rest of this entry »

Microsoft Defends Patent-Licensing Strategy

Amidst the flurry of patent cases among the lot of mobile technology companies, it is difficult to keep track of who is bringing whom to court. In light of the sheer number of cases and their ever growing international scope, even the use of flow charts cannot fully rescue our collectively boggled minds from the convoluted and fast evolving relationships of these entities. On this basis alone, many would say that without a serious overhaul, the patent system risks completely stymieing its objective of fostering innovation – at least in the mobile business where companies appear more preoccupied by legal disputes than research and development.

According to Microsoft Deputy General Counsel Horacio Gutiérrez, however, such legal wrangling is an expected consequence following the introduction of any new and disruptive technology. Read the rest of this entry »

Samsung Breathes Temporary Sigh of Relief in U.S. Patent Battle with Apple

In the latest development in the legal saga between Apple and Samsung, U.S. District Judge Lucy Koh tentatively declined to issue a preliminary injunction that would bar some Samsung smartphones and tablets from U.S. sale. In July, Apple had requested the injunction from the Northern District Californian federal court on the basis that Samsung’s Galaxy line of products copies the iPhone and iPad in functions and appearance. Read the rest of this entry »

Google-Motorola Deal: the Patent Portfolio Factor

So we’ve all heard how Google recently bought Motorola for a hefty $12.5 billion on Monday. Aside from the synergies Google gains from end-to-end control, as Google now has hardware, software and service arms to create their mobile products, perhaps just as importantly, Google has also purchased one of the largest patent portfolios of its kind in the mobile industry. Read the rest of this entry »

Patent Troll Lawyer’s Turn to Pay-Up

We have all heard stories of abusive or extortion-like practices by patent trolls and how they can strike fear in the hearts of independent, start-up companies. But in a refreshing twist, Techdirt recently posted a story about how a patent troll’s lawyer was sanctioned by the Court. In Eon-Net v. Flagstar Bancorp, not only did the U.S.’ Court of Appeals for the Federal Circuit hold for the alleged patent infringer, they also approved of over $600,000 in sanctions again Eon-Net’s lawyer for filing a spurious lawsuit. Read the rest of this entry »

Patent Troll on Steroids: How America’s Patent System May Hurt Innovation

This American Life (TAL) is running a story this week that is well worth tuning in for. Some may have heard of Nathan Myhrvold during his time as IBM’s chief strategist and chief of technology or from his $600, six-volume cookbook. But few outside IT circles would know of his “innovative invention company” Intellectual Ventures, and how it is regarded by many in the field as the leader of patent trolls, having amassed roughly 35,000 patents since its inception in 2000. Read the rest of this entry »

Pfizer v. Ratiopharm: Invalid Patent Insufficient to Support Back-Claim Compensation

Generic drug companies have suffered a setback in the fight to claim compensation when they have been incorrectly kept off the market. The Federal Court of Appeal has refused to overturn a prohibition order against Ratiopharm, thereby disallowing Ratiopharm’s compensation claim, in spite of the fact that Pfizer’s patent is invalid.

Pfizer was initially successful in preventing the invalidation their Patent No. 1,321,393 (‘393 Patent) under the NOC Regulations. Then in 2006, Ratiopharm had another go at Patent ’393 and it was subsequently found that Pfizer had wilfully relied on fraudulent material in support of their patent. This allowed Ratiopharm to then market its generic version of Pfizer’s drug NORVASC. Read the rest of this entry »

Podcast: Amazon’s “one-click purchasing” Patent Battle

The official blog of Search Engine by Jesse Brown recently featured a very informative podcast discussing the implications of Amazon’s 13-year “one click” ordering system patent dispute in Canada, which can potentially be concluded very soon. Amazon has held this patent in the U.S. for many years now, but here in Canada, Amazon was denied the patent in 2009. Amazon appealed the decision, of course, and the case has made its way before the Federal Court of Appeal with the hearing held on Tuesday. Read the rest of this entry »

Nokia and Apple’s Patent Dispute Settled

Two of the world’s largest mobile giants, Nokia and Apple, have finally ended a lengthy legal battle on Tuesday by entering into a patent-license settlement covering all their patent disputes. If one party is to be declared the “winner”, it would likely be Nokia as Apple will be making a one-time payment to Nokia and pay continuing royalties for the term of the agreement. The specific financial terms have not been released. Read the rest of this entry »