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08.12.13

Groklaw Slams the US Legal Framework for (Mis)Handling of Patents

Posted in Patents at 4:48 am by Dr. Roy Schestowitz

“I am a US citizen, and I’m ashamed of what has just happened.” –Pamela Jones

Groklaw team

Summary: Even the popular Web site headed by a law professor and a paralegal is growing angry at what it is increasingly viewing as protectionism that facilitates corruption, not justice

PATENT maximalists have long used the nice-sounding word “innovation” in order to market to the public corporate protectionism, which does not sound as widely beneficial as “innovation”. Public perceptions are evolving on all sorts of issues, one of which is patents.

Ever since Google took part of Motorola it has been involved in battles where patent stacking by Apple and Microsoft challenged the zero cost of Android, the world’s leading operating system (as measured in terms of number of new installations). Geoffrey Manne writes:

It remains to be seen if the costs to consumers from firms curtailing their investments in R&D or withholding their patents from the standard-setting process will outweigh the costs (yes, some costs do exist; the patent system is not frictionless and it is far from perfect, of course) from the “over”-enforcement of SEPs lamented by critics. But what is clear is that these costs can’t be ignored. Reverse hold-up can’t be wished away, and there is a serious risk that the harm likely to be caused by further eroding the enforceability of SEPs by means of injunctions will significantly outweigh whatever benefits it may also confer.

SEPs are standard-essential patents, as we covered recently. The one with her eyes on the FRAND ball is the headmistress of Groklaw. Citing a 2006 paper, Jones shows that “royalty stacking” has long been seen as a form of “exploitative abuse”. Jones also cites an analysis showing the relevance of this to the Samsung-Apple battle. Noting Microsoft’s contribution to this battle, she writes:

Motorola Presses Its Case v. Microsoft’s FRAND Attack in Seattle and in Germany

[...]

As for the judge, he’s maybe starting to realize that some of his assumptions about FRAND requirements conflict with what the experts are now telling him. He expresses a measure of confusion about it in an order [PDF] on what the experts for both sides can tell the jury. Here’s what he won’t allow Motorola’s experts to tell them: that being willing to negotiate is sufficient to meet a FRAND obligation. That contradicts what this judge has already ruled in this crazy case, so he doesn’t like that, I suppose. The “reason” they can’t say that to the jury is, he says, because he gets to decide what is or isn’t a fulfillment of a RAND obligation, in that he’s Da Law on Microsoft’s obligations under Washington state law which he believes the world must go along with, Germany included. Experts can’t opine on legal conclusions. However, Motorola has now informed him via this route that he’s been getting some things seriously wrong on what FRAND obligations are and what good faith requires. Perhaps it will influence him. He says that the Motorola experts can input how the jury instructions read. I wouldn’t put much faith in that if I were Motorola, and I gather they don’t. This German prong is getting interesting, I must say.

As FOSS Force put it the other day:

Microsoft continues to collect patents [payments] from nearly everyone using Android, without proving a thing.

Meanwhile, notes Jones, the Microsoft-led Nokia is threatening Android with FRAND as well. Quoting a slightly old article, she picks her words as follows: “This is an article from June, I know, but it speaks to the problem the ITC was trying to address, before the White House just emasculated the ITC. It’s for subscribers only, but I wanted you to know about it, because Nokia’s counsel said that in the past, companies were “far more likely” to respect IP because they participated in the standardisation process and had the incentive to make sure it worked. But today would-be licensees “apply the totally opposite strategy” and “established and respected companies” wilfully infringe IP. That is exactly what Apple and Microsoft have been doing, as I see it. They claim they respect IP, and they demand that theirs be respected, but they have yet to pay Samsung or Motorola for their FRAND patents, instead forcing them to incur the expense of litigation while they enjoy a long, free ride. Lukander said that the problem of free-riding is much greater than any problem of hold up by FRAND patent owners, and that as a result, Nokia has decided to step back from the standardisation process, electing either not to join certain standard-setting organisations or not to contribute certain technologies to these organisations. The FRAND system used to work fine, Nokia said, because negotiations usually worked, but they only worked because the threat of an injunction inspired cooperative negotiations. But now, it’s working against innovation and against users, because it’s no longer balanced. Timothy Lucie-Smith, head of IP licensing at Ericsson, is also quoted in the article, saying that companies that accused others of hold-ups “just want to get a good deal [after] coming late to the development process”. And that’s exactly what I’ve been telling you this is about, since day one.”

“The ITC’s political bias and harm to innovation is so controversial that even lawyers’ blogs call for its dismissal.”Remember when Groklaw protected Apple’s side in a lawsuit for a long time? That all seems to be undone now. “Apple drops to 32% tablet market share in Q2 amidst strong YoY Android growth,” said one headline. Jones commented on it by saying it “will continue, because no one admires a bully.”

So Jones is definitely not sympathising with Apple or buying Apple products anymore. That’s good. While unprepared to criticise the USPTO as much as we have, she is definitely slamming the ITC and some of this peripheral legal bureaucracy right now. The ITC’s political bias and harm to innovation is so controversial that even lawyers’ blogs call for its dismissal. Our wiki page about the ITC shows that none of this should be seen as new. Pamela Jones said something which we said years ago about this corruption of the system. To quote: “By that definition of the ITC, they certainly did their job, protect a US company from a “foreigner” even though Apple was found by the ITC to be guilty of reverse holdup.”

Yes, exactly. Not news.

“It’s not even a small step to patent reform to make the system even less fair,” she added. “As long as they are Apple’s and not Samsung’s property rights” the ITC will do its thing, she believes.

“Apple is already moving to ban Samsung again.”On another day she wrote: “It’s so obviously protectionism, it’s hardly a surprise that it’s upset people. Samsung was found by the ITC to have behaved in good faith, but Apple was ruled to have been guilty of “reverse hold up”, meaning it didn’t present itself as a willing licensee. If *that* isn’t enough to justify an injunction, when everyone — courts and regulators — say it should be enough, what would be? And the reason given — that they were worried about FRAND hold up — is clearly not the real reason, since in this fact pattern, it was actually the opposite. So, it’s a black mark on the US in Korea. If courts and regulators play favorites, based on a company’s nation of origin, why wouldn’t other countries do the same? And if you can’t get a fair shake in the US, why would companies located elsewhere ever donate anything to a standard, knowing that they have no way to enforce their rights? Nokia has already said it won’t be donating as it has in the past. Telling such companies that they are still free to enforce their rights in court is silly. It costs millions for a patent infringement lawsuit, for starters, while unwilling licensees like Apple free ride, and as we saw in the Apple v. Samsung litigation, fairness isn’t at all what a foreign company can expect to receive in US courtrooms either. Apple is the biggest US taxpayer, and it paid off. That’s about it. And it smells funny. Yes. I said it. This is about lobbying by Microsoft and Apple, here and in Europe and Australia and wherever they can. It has nothing to do with FRAND holdup. It’s not even pretending to be about fairness. It’s about money. Apple and Microsoft don’t have a lot of FRAND patents. So they want to block competitors in the smartphone market from distribution with regular patents and design patents — just wait to see what ITC does to Samsung next week, with the excuse that the patents are utility patents, not FRAND — and then Samsung and others who developed this field are blocked from doing the same. Sound fair to you? I am a US citizen, and I’m ashamed of what has just happened.”

For those who believe there is no harm, Jones cites this report:

The decision will probably handicap Samsung’s ability to obtain higher technology licensing fees from Apple in any negotiations, said Susan Kohn Ross, a trade lawyer with Mitchell Silberberg & Knupp in Los Angeles.

And guess what? Apple is already moving to ban Samsung again. From the same corporate news site:

Apple Inc. (AAPL) is trying to force Samsung Electronics Co.’s mobile devices off U.S. store shelves a week after dodging an iPhone 4 ban by a rare White House veto.

As Jones put it in relation to this separate article: “The US can waive Apple’s reverse holdup regarding Samsung’s FRAND patent, because the US economy needs and wants iPhones. But if India looks at its own national needs with respect to IP, that’s not allowed.”

The problem here is systemic. So we need to hammer the system, which a corporate coup distorted if not created. Here is Jones’ longer analysis of this case:

The ITC, according to the Wall St. Journal, decided today to order an injunction against certain Samsung products, thanks to Apple, who was just shown mercy by the President when the shoe was on the other foot. Of course, you know this isn’t necessarily the end. The President gets to do for Samsung what it did for Apple, should he so desire:

As part of its findings, the ITC overturned an administrative judge’s earlier finding that Samsung infringed a potentially important Apple patent on phone design.

The ITC said Samsung can continue to import and sell its infringing devices during a two-month period in which the Obama administration can review Friday’s order.

Samsung had warned the ITC that a product ban potentially could have a significant impact on the South Korean company’s U.S. devices and create “an immediate and long-lasting shortfall” of smartphones in the U.S. market.

Remember that patent aggression that Microsoft had engaged in and the lawsuit filed against a government department which stood in Microsoft's way? Google is trying to do the right thing here. As one report put it, “Google Asks Judge to Toss Microsoft Suit Over Phone Ban”.

“This whole system is undergoing a rapid collapse, so US citizens should reform or overthrow parts of it.”Well, that was a great reminder that the same government which fights privacy, truth/whistleblowing, and even journalism while firmly standing for torture, assassination and indefinite detainment without charges is no exception when it comes to patents. This whole system is undergoing a rapid collapse, so US citizens should reform or overthrow parts of it. The end of the patent regime, for instance, is long overdue.

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