Federal Trade Commission In the Matter of Google Inc., FTC File No. 121-0120 February 8, 2013 Chicago, Illinois 1
In a land not too far away and a time not too long ago Motorola, Libertyville, Illinois, 2003 ccarani@mcandrews-ip.com 2
Rise and Fall January 2007 Ed Zanders, CEO Motorola Steve Jobs, CEO Apple ccarani@mcandrews-ip.com 3
The beginning of an epic tale ccarani@mcandrews-ip.com 4
Google obtains Motorola Mobility 2012 Google acquires Motorola Mobility for purchase price of $12.5 billion Over 24,000 patents and patent applications Many are essential to industry standards to provide wireless connectivity and internet-related technologies smartphones, tablets, gaming systems, operating systems, HD television, etc. ccarani@mcandrews-ip.com 5
sso Interoperability Standard setting can deliver substantial benefits to American consumers, promoting innovation, competition, and consumer choice. ccarani@mcandrews-ip.com 6
Metamorphosis Patent ccarani@mcandrews-ip.com 7
Metamorphosis Patent ccarani@mcandrews-ip.com 8
Metamorphosis Patent Patent Essential to Industry Standard ccarani@mcandrews-ip.com 9
Metamorphosis Patent Patent Essential to Industry Standard Market Power ccarani@mcandrews-ip.com 10
Enter the Federal Trade Commission Principal Mission: Promotion of consumer protection and the elimination and prevention of anti-competitive business practices. ccarani@mcandrews-ip.com 11
History of Safeguarding Integrity of the Standard-Setting Process. In re Dell Computer Corp. (1996) In re Union Oil Company of California (2004) In re Rambus, Inc. (2006) In re Negotiated Data Solutions LLC (2008) In re Robert Bosch GmbH (2012) ccarani@mcandrews-ip.com 12
FTC Complaint Violation of Section 5 of the FTC Act Unfair Method of Competition Unfair Business Acts or Practice Google reneged on its FRAND commitments Pursued or threatened to pursue injunctions (district courts/itc) against willing licensors. ccarani@mcandrews-ip.com 13
Basic Allegation ccarani@mcandrews-ip.com 14
Basic Allegation ccarani@mcandrews-ip.com 15
Basic Allegation ccarani@mcandrews-ip.com 16
Basic Allegation Patent 1 Patent 2 Patent 3 Patent 4 Patent 5 Patent 6 Patent 7 Patent 8 Patent 9 Patent 10 Patent 11 Patent 12 Patent 13 Patent 14 Patent 15 Patent 16 Patent 17 Patent 18 Patent 19 Patent 20 Patent 21 Patent 22 Patent 23 Patent 24 Patent 25 ccarani@mcandrews-ip.com 17
Basic Allegation Patent 1 Patent 2 Patent 3 Patent 4 Patent 5 Patent 6 Patent 7 Patent 8 Patent 9 Patent 10 Patent 11 Patent 12 Patent 13 Patent 14 Patent 15 Patent 16 Patent 17 Patent 18 Patent 19 Patent 20 Patent 21 Patent 22 Patent 23 Patent 24 Patent 25 ccarani@mcandrews-ip.com 18
FTC s concerns According to the FTC, if left unchecked, this type of patent hold-up has negative consequences: 1. It can lead to higher prices, as companies may pay higher royalties for the use of Google s patents because of the threat of an injunction, and then pass those higher prices on to consumers. 2. It may cause companies in technology industries to abandon the standard-setting process and limit or forgo investment in new technologies. ccarani@mcandrews-ip.com 19
Basic Mechanics of Consent Decree 1. Google must withdraw its claims for injunctive relief on FRANDencumbered SEPs around the world 2. Google cannot seek injunction against a willing licensee 3. Google must offer a FRAND license to any willing licensee who requests one 4. If parties disagree on FRAND rate, go to binding Arbitration or District Court for determination 5. Can Still Argue Justiciability, Invalidity, Infringement, Essentiality ccarani@mcandrews-ip.com 20
Threat of Injunction Removed threat of injunction NEGOTIATION LITIGATION/ARBITRATION ccarani@mcandrews-ip.com 21
Threat of Injunction Removed threat of injunction NEGOTIATION LITIGATION/ARBITRATION ccarani@mcandrews-ip.com 22
Exceptions Google does remain free to seek and enforce injunctions: 1. a potential licensee is outside the jurisdiction of the United States district courts; 2. a potential licensee has stated in writing or in sworn testimony that it will not license the FRAND Patent on any terms, 3. a potential licensee refuses to enter into a license agreement on the terms set by a final court ruling or through binding arbitration; or 4. a potential licensee fails to provide a written confirmation in response to a FRAND Terms Letter from Google ccarani@mcandrews-ip.com 23
Effect of Reciprocity Long Arms May Reach Many SEPs ccarani@mcandrews-ip.com 24
Public Comments American Arbitration Association American Intellectual Property Law Association Apple Inc. Application Developers Alliance Computer & Communications Industry Ass'n DVB Project Electronic Privacy Information Center Ericsson Inc. F de la Torre, Lydia Ferrell, Myrtle C GTW Associates IEEE Innovation Alliance Intellectual Property Owners Association International Center for Law & Economics Laubscher, Kim Law Office of David Balto Microsoft Corporation Newman, David Qualcomm Incorporated Research In Motion Corp Sokolow, Mark Valley View Corporation Washington Legal Foundation ccarani@mcandrews-ip.com 25
Most common refrain Noerr-Pennington Doctrine (e.g., AIPLA) Appealability of arbitrators decision (e.g. Apple) If SSO specifies dispute resolution path, what governs? (e.g. DVB Project) ccarani@mcandrews-ip.com 26
Things to keep in mind It is non-binding on other parties It is non-precedential (persuasive? Court? ITC?) There are exceptions. (recall what Apple and Microsoft committed to voluntarily when the Department of Justice and other agencies in Europe were looking into the matter. They both said that they won t seek injunctive relief based on SEPs, ever.) Road map to safe harbor for other parties? ccarani@mcandrews-ip.com 27
Injunctive Relief ccarani@mcandrews-ip.com 28
In General: Is Injunctive Relief a Credible Threat? ccarani@mcandrews-ip.com 29
ebay Inc. v. MercExchange, L.L.C. 547 U.S. 388 (2006) The patentee must show that: (1) it is likely to succeed on the merits; (2) it is likely to suffer irreparable harm in the absence of preliminary relief; (3) that the balance of the equities tips in the patentee s favor; and (4) that an injunction is in the public interest. ccarani@mcandrews-ip.com 30
Is Injunctive Relief a Credible Threat? The patentee must show that: (1) it is likely to succeed on the merits; (2) it is likely to suffer irreparable harm in the absence of preliminary relief; (3) that the balance of the equities tips in the patentee s favor; and (4) that an injunction is in the public interest. ccarani@mcandrews-ip.com 31
Is Injunctive Relief a Credible Threat? The patentee must show that: (1) it is likely to succeed on the merits; (2) it is likely to suffer irreparable harm in the absence of preliminary relief; (3) that the balance of the equities tips in the patentee s favor; and (4) that an injunction is in the public interest. interoperability ccarani@mcandrews-ip.com 32
Is Injunctive Relief a Credible Threat? The patentee must show that: (1) it is likely to succeed on the merits; (2) it is likely to suffer irreparable harm in the absence of preliminary relief; (3) that the balance of the equities tips in the patentee s favor; and (4) that an injunction is in the public interest. ccarani@mcandrews-ip.com 33
Difficulties in Showing Irreparable Harm 1. In view of FRAND commitments haven t SEP holders acknowledged the money will do? ccarani@mcandrews-ip.com 34
Difficulties in Showing Irreparable Harm 2. May be difficult to make argument of loss of exclusivity when SEP is rolled into industry standard. In other words, everyone is using it, what s the harm from one more user?? ccarani@mcandrews-ip.com 35
Difficulties in Showing Irreparable Harm 3. New Causal Nexus Requirement ccarani@mcandrews-ip.com 36
New Causal Nexus Requirement Preliminary Injunction Context If the patented feature does not drive the demand for the product, sales would be lost even if the offending feature were absent from the accused product. Thus, a likelihood of irreparable harm cannot be shown if sales would be lost regardless of the infringing conduct. the requisite causal nexus... can be established by showing either that the patented feature is an affirmative driver of consumer demand, or that [its] absence would suppress consumer demand.ʼ" Apple, Inc. v. Samsung Elecs. Co., 678 F.3d 1314, 1324 (Fed. Cir. 2012) ( Apple I ) Apple, Inc. v. Samsung Electronics Co., Ltd., 695 F.3d 1370, 1374 (Fed. Cir. 2012) ( Apple II) ccarani@mcandrews-ip.com 37
High Bar Permanent Injunction Context Without a causal nexus, this Court cannot conclude that the irreparable harm supports entry of a permanent injunction. Apple, Inc. v. Samsung Elecs. Co., 11-cv-1846, (N.D. Cal Dec. 17, 2012) (J. Koh) ccarani@mcandrews-ip.com 38
If No Permanent Injunction Then what? The Court sets a reasonable on-going royalty rate. (See Judge Robart 207 pg opinion setting FRAND rate) But what if Defendant is your Competitor? Is a compulsory license equitable? What if infringed patent is design patent covering flagship product? Is a compulsory license equitable? ccarani@mcandrews-ip.com 39
Final Thought With new causal nexus requirement: 1) Are permanent injunctions a credible threat? 2) Are most all litigated patents essentially subject to compulsory licensing (at FRAND rates), such rates to be determined by a judge? Perhaps SEPs and NSEPs are closer than we think ccarani@mcandrews-ip.com 40
Presenter Christopher V. Carani, Esq. Shareholder McANDREWS HELD & MALLOY LTD. 500 West Madison St., Suite 3400 Chicago Illinois 60661 (Tel) 312 775 8000 (Fax) 312 775 8100 ccarani@mcandrews-ip.com www.mcandrews-ip.com Christopher V. Carani, Esq. is a partner and shareholder at the intellectual property law firm of McAndrews, Held & Malloy, Ltd. based in Chicago, Illinois. He is a leading voice in the field of design law. Chris counsels clients on a wide range of strategic design protection and enforcement issues, both in the U.S. and abroad. He is often called upon to render infringement, validity and design-around opinions and serve as a legal consultant/expert in design law cases. Chris currently chairs the American Bar Association s Design Rights Committee, and is the past chair of the American Intellectual Property Law Association (AIPLA) Committee on Industrial Designs. In the landmark design patent case Egyptian Goddess v. Swisa, he authored amicus briefs on behalf of the AIPLA at both the petition and en banc stages. In 2009 and 2011-12, he was an invited speaker at the United States Patent & Trademark Office s ( USPTO ) Design Day. Prior to joining McAndrews, Chris served as a law clerk to the Honorable Rebecca R. Pallmeyer at the U.S. District Court for the Northern District of Illinois. Chris was conferred his Juris Doctorate from The Law School at The University of Chicago. He also holds a Bachelor of Science in Engineering from Marquette University. He is licensed to practice before the U.S. Supreme Court, the U.S. Federal Circuit Court of Appeals and other U.S. District Courts. He is a registered patent attorney licensed to practice before the USPTO. He has published and lectured extensively on design law and is a frequent contributor to CNN on intellectual property law issues. He is also often called upon to provide comment to other media outlets, including New York Times, Wall Street Journal, NPR, PBS TV, CNBC TV, BBC, Bloomberg TV, Reuters, InformationWeek, Fast Company, ComputerWorld, PCWorld, Washington Post, L.A. Times, Chicago Tribune, Forbes, Fortune, and FoxBusiness TV. ccarani@mcandrews-ip.com 41