Posts Tagged: "smartphone patent wars"

When the question “What is the future of BlackBerry?” was entered into the virtual Magic 8 Ball the response was: “Don’t count on it.” Hardly scientific, only mildly amusing, but as far as predictions it is certainly within the envelope of possibilities. Still, the company continues amassing a portfolio of US patents. But this all begs the question about the direction the company will follow with new private ownership. Will they morph into a licensing juggernaut? Might they give up being a manufacturing company altogether and turn their considerable portfolio on the industry? Will the patent portfolio be auctioned off to the highest bidder?

In my opinion the best way to judge the success or failure of the patent system is by looking broadly at the type of competition it enables or disables in the marketplace. And that doesn’t mean focusing solely on patent litigation statistics – of course there are going to be fights when such a high stakes prize as mobile computing is up for grabs and of course firms competing with such different business models are going to come into conflict. But look at what that competition has done for innovation and product advances and for consumer choice and pricing. You need the option of patent protection to provide the necessary freedom of choice in market approach, (whether it is open, proprietary or a blend of both), to enable competition between firms employing different market approaches and the innovation engendered by that competition.. The correct focus for this issue is not the intrinsic merit of the concept of patent protection, but rather what the existence of patents does to promote business model diversity and what that in turn does to promote innovation. This is the important point and at least in my view it seems clear that having patents enables more business model diversity and consequently more innovation than not having them.

After examining the record of the investigation the Commission decided to review the ALJ’s determination with respect to the claim construction of the phrase “touch sensitive input device,” which appears in claim 1 of the ‘862 patent. The Commission will also review: (1) the finding that the accused products literally infringe claim 1 of the ‘862 patent; (2) the finding that Harris ‘464 anticipates claim 1 of the ‘862 patent; and (3) the finding of non-obviousness. In connection with the Commission’s review, the parties have been requested to brief their positions these discrete issues.  The Commission will review no other issues.

Yesterday, the Judge Koh of the United States District Court for the Federal Circuit denied Apple’s request for a permanent injunction in their ongoing patent war over smartphones with Samsung. The denial of the injunction will allow Samsung to continue to sell phones found to infringe Apple’s patents. How can that make sense to anyone? The patentee, who has already won, must establish entitlement to an order to exclude ongoing and future infringement under a four-factor test that balances equities? What good is a patent? Why did the Patent Office even bother reviewing the patent in the first place then? Why do we pretend that there is an exclusive right in the first place? And the most ignorant elements of the anti-patent community have the audacity to refer to a patent as a monopoly? Give me a break!

Why is this fight so important? It could be a crucial decision for both companies, with the winner gaining leverage in the fast-paced and ever-growing billion dollar market. Each side wants to protect their stake, since they risk losing their high position on the mobile leaderboard as so many companies before them have done. Prime examples of companies that were once at the top of the game but are nowhere to be seen are BlackBerry and Nokia. Both of these were once the biggest names in mobile phones and handheld devices, but lost their edge once new technology started coming out.

As readers will no doubt be aware, Australia is one of the jurisdictions in which Apple is currently pursuing litigation against its Android-based smartphone and tablet competitors. The claims and counter-claims by Apple and Samsung are the subject of a trial in the Australian Federal Court in Sydney which has now been extended into the first months of 2013. According to reports, as many as 22 Apple patents have been asserted against Samsung, although it is as yet unclear how many of these will actually be pressed at trial. A number of the asserted patents are innovation patents. An ‘innovation patent’, is in many respects unique to Australia. An innovation patent provides a ‘second tier’ right, with a lower barrier to validity than the conventional inventive step test, and a shorter maximum term of protection of just eight years.

J. Posner also brought the value of the patents declared to be essential under standards bodies to bear on the damages question.  Essential patents must be evaluated for absolute value and relative value to the full-declared portfolio.  These values are needed where a non-linear function is proposed for a royalty determination based on infringement of a subset of the declared patents.  The difficulty presented by an assertion of a single essential patent from a much larger portfolio is “that if [the potential licensee] had wanted to license any of the patents in [the standard’s essential portfolio], the license fee would have exceeded the product of the percentage of the portfolio represented by the patent and the value of the entire portfolio.”  Objective data to present a non-linear function was needed, and even where presented, the notion of a FRAND royalty applied to “confine the patentee’s royalty demand to the value conferred by the patent itself as distinct from the additional value – the hold-up value – conferred by the patent’s being designated as standards essential.”

Last month, both the U.S. Senate and U.S. House of Representatives held hearings related to patent disputes, the ITC, SSOs and FRAND licensing – no doubt precipitated by the smart phone patent wars. On July 11, 2012, the full Senate Judiciary Committee held a hearing entitled “Oversight of the Impact on Competition of Exclusion Orders to Enforce Standard-Essential Patents.” Witnesses at the Senate hearing included the Acting Assistant Attorney General, Antitrust Division, U.S. Department of Justice, and the Commissioner of the Federal Trade Commission (FTC). A week later, on July 18, 2012, the House Judiciary Committee’s Subcommittee on Intellectual Property, Competition and the Internet held a hearing entitled “The International Trade Commission and Patent Disputes.” Witnesses at the House hearing included Professor Colleen Chien of Santa Clara University School of Law, IP Counsel for Ford, VP of Litigation for Cisco, the General Counsel of Tessera Technologies, and the President of The American Antitrust Institute (AAI).

Commenting on the Yahoo! Inc. patent infringement lawsuit filed against Facebook in March of 2012, Mr. Cuban concludes his post by stating: “I hope Yahoo[!] is awarded $50 billion dollars. It is the only way that consumers will realize what is at stake with patent law as is. Then maybe we can get it right and further innovation and competition in this country.” These statements are from a very influential technology entrepreneur, investor and generally-recognized American business guru. Thus, it would seem that the continuous negative headlines from the smart phone patent wars are definitely giving patents a bad rap!

In all cases, the IEEE, JEDEC, ITU and TIA policies apply to both issued patents and pending applications (regardless of whether such applications are published). Further, all four policies make clear that the SSO will not get involved in the particulars as to what constitutes FRAND licensing practices. Interestingly, and for those paying attention, the IEEE, JEDEC and ITU policies require disclosure of essential patents, whereas the TIA policy simply encourages disclosure of essential patents. Again, there simply is no generally-accepted test to determine whether a particular license offer satisfies the reasonable aspect of an SSO participant’s FRAND commitment. How does this play out in practical terms? A recent case is instructive.