ACC July Lunch: The Mobile Patent Wars J l 11 & 12, July 12 2012
Mark D. Rowland, Partner, Ropes & Gray LLP Gabrielle E E. Higgins Higgins, Partner Partner, Ropes & Gray LLP Jim DeGraw, Partner, Ropes & Gray LLP Daniel T. Keese, Associate, Ropes & Gray LLP ROPES & GRAY LLP
This presentation should not be construed as legal advice or a legal opinion on any specific facts or circumstances. This presentation is not intended to create a lawyer-client relationship. The contents are intended for general informational purposes only, and you are urged to consult your own lawyer concerning your own situation and any specific questions you may have. The views expressed by the presenters are their own and do not reflect those of the company or firm that they are associated with. 2
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Outline • Mobile Patent Wars • Standards Essential Patents and RAND • Recent Developments at the ITC • Patent Transfers • How the Mobile Wars are Affecting Other I d ti Industries
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Mobile Patent Wars
Past Patent Wars • Past Patent Wars Include: – Stent Wars (began in 1990s and still ongoing) – Wright Brothers Patent War (early 1900s) – Telephone Patent Wars (1870s-1880s) – Sewing Machine Wars (1850s)
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Mobile Patent Wars
Case Highlights—Dates g g Suits Filed
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Mobile Patent Wars
The Many Fronts of the M bil Patent Mobile P t t Wars W • The number of mobile patent suits has increased dramatically in recent years • Ab Aboutt 25% per year since 2006 according to Lex Machina
http://www.pcmag.com/article2/0,2817,2399098,00.asp
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Mobile Patent Wars
Early Skirmishes in the Mobile Patent Wars •
Motorola v. Rim – In Feb. 2008 Motorola sues RIM in District Court and the ITC to enforce previously licensed patents – On the same day RIM sues Motorola for patent infringement, RAND licensing, and breach of a previous license agreement – June 11, 2010 the parties settle and RIM agrees to pay an up up-front front license fee plus ongoing royalties
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Nokia v. Apple – Nokia sues Apple pp in October of 2009,, asserting g 10 patents related to GSM, UMTS and WiFi standards – Apple countersues and both parties eventually file ITC complaints against each other – Apple agrees to up-front fee and ongoing royalty when the parties settle on June 14, 2011 7
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Mobile Patent Wars
Apple pp v. HTC • Apple pp challenges g manufacturers of Android-based p phones (3/2/2010), filing in D. Del. and the ITC • ITC Final Det. in 337-TA-710 (Dec. 19, 2011): HTC iinfringes fi 1 patent t t – HTC phones excluded, but HTC is allowed a 4-month design around period before the order takes effect – June 19: Apple brings action seeking to enforce order against phones HTC says incorporated a design around
• ITC Final Det Det. in 337-TA-721 (Feb (Feb. 17 17, 2012): No Apple violation of Section 337 • UK High g Court of Justice ((7/4/2012): ) 3 Apple patents invalid, 1 not infringed 8
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Mobile Patent Wars
Oracle v. Google g •
August 2010 -- Oracle is the first competitor to directly sue Google over Android (N (N.D. D CA Case No No. 4:10-cv-3561) – Other suits target device makers – Oracle files suit accusing Google of infringing 7 patents and Oracle’s Java copyrights acquired from Sun Microsystems
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By the time the case is tried Oracle has withdrawn most of its patent claims (5 of the 7 asserted patents) – O Oracle l is i fforced d tto withdraw ithd ((with ith prejudice) j di ) 5 patents t t th thatt were fifinally ll rejected during reexamination in order to keep their trial date – One patent is confirmed during trial, but is already withdrawn
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I Issues decided d id d b by two jjury trials i l and d a court ruling: li – No patent infringement – Only infringed 8 lines of copyrighted code – Asserted APIs are not copyrightable 9
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Mobile Patent Wars
Motorola v. Apple pp •
Motorola sues Apple in N.D. Ill, S.D. FL and the ITC – Apple responded with lawsuits in W.D. WI, and the ITC
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ITC Actions – 337-TA-750 Final Determination ((Mar 16,, 2012): ) No Motorola violation of Section 337 as to 3 Apple patents – ITC initial determination 337-TA-745 (April 24, 2012): Apple infringes 2 Motorola patent, but 1 is invalid
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Cases consolidate in N.D. Ill before Judge Posner (No 1:11-cv-8540) •
June 7, 2012 – Posner cancels trial after striking damages experts from both sides, but later agrees g to injunction j hearing g ((June 13))
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June 22, 2012 order: “[N]either party is entitled to an injunction. Neither has shown that damages would not be an adequate remedy. True, neither has presented sufficient evidence of damages to withstand summary judgment – b t that but th t is i nott because b damages d are impossible i ibl tto calculate….” l l t ”
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Mobile Patent Wars
Microsoft v. Motorola •
Microsoft sues Motorola in W.D.WA and the ITC (Oct. (Oct 2010) – Motorola then sues in W.D.WI, S.D.FL and the ITC – District Court actions consolidate in W.D.WA
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ITC Actions – ITC issues exclusion order against MMI handsets on 1 of 9 asserted patents in 337-TA-744 (May 18)
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– ITC initial determination 337-TA-752 (April 23) • Microsoft infringes 4 of 5 Motorola patents, recommends excluding Xbox
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G German Actions A ti – Motorola obtains injunctions against Windows 7 and Xbox in Germany
“Android has a patent fee fee. It It'ss not like [it]'s free. You do have to license patents.” – Microsoft CEO Steve St Ballmer, B ll http://online.wsj.com/article/SB100014 240527487034661045755298616688 29040.html
– W.D.WA issues TRO and Preliminary Injunction against enforcing those injunctions prior to Nov. RAND trial 11
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Mobile Patent Wars
Apple pp v. Samsung g •
The two largest smartphone manufacturers are in a multi-front battle – Apple sues in N N.D. D CA (No (No. 11-cv-1846) on April 15 15, 2011 – Samsung follows with suits in N.D. CA, South Korea, Japan, Germany and the ITC, Apple then files in the ITC, Australia, Germany, etc. – Apple relies on design patents in multiple litigations
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Important developments: – In May the two CEOs agree to participate in settlement talks – Samsung Galaxy Tab 10.1 tablets enjoined in Germany, Australia (later overturned), and the U.S. – Judge Koh denies Apple’s request for a P.I. but issues one on remand • Fed. Cir. remand “However, the court denied injunctive relief because it found that Apple had failed to establish a likelihood of success on the merits. In particular, it found that Samsung had raised a substantial question as to the validity of the D'889 patent. We sustain the court's finding of a likelihood of irreparable harm, but ... the court erred in its analysis of the validity issue issue.”” (Fed (Fed. Cir Cir. 5/14/2012)
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N.D. CA case is scheduled for trial on July 30, 2012 12
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Mobile Patent Wars
What the Mobile Patent Wars Mean for Companies • Important p matters may y be developed p by y these cases – Sufficiency of proof for damages – Globalization of disputes in search of speed and other advantages – What is sufficient for and what bars injunctive relief
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Outline • Mobile Patent Wars • Standards Essential Patents and RAND • Recent Developments at the ITC • Patent Transfers • How the Mobile Wars are Affecting Other I d ti Industries
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Standards Essential Patents and RAND
What are Standard Essential Patents and RAND? • Standard: specification p that has been approved pp by ya standards setting organization, allowing inter-operability between products (e.g., 802.11, H.264, 4G) • St Standard d d essential ti l patents t t (SEP (SEPs): ) claim l i iinventions ti th thatt are required to practice a given industry standard (definition of “essentiality” may differ by standard) • Standards setting organizations have rules about the disclosure and licensing of standard essential patents • “Th “The P Patent t t Holder H ld iis prepared d tto grantt a lilicense tto an unrestricted ti t d number of applicants on a worldwide, non-discriminatory basis and on reasonable terms and conditions to make, use and sell implementations of the above [standard]. Negotiations are left to the parties and are performed outside the ITU-T, ITU-R, ISO or IEC.” – Patent Statement and Licensing Declaration for ITU-T or ITU-R 15
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Standards Essential Patents and RAND
Companies Take Different Positions on RAND •
Apple views in a Nov. 11, 2011 Letter to ETSI: – “[P]arty [P]arty who made a FRAND commitment … must not seek injunctive relief on such patents.” – “An appropriate rate is one that is reflective of party’s portfolio of cellular standards essential patents and patent applications, as compared to the total total, industry-wide pool pool….”
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Microsoft in a Feb. 8, 2012 statement on its website: – “Microsoft will not seek an injunction or exclusion order against any firm on the basis of those essential patents” patents – “Microsoft will make those essential patents available for license to other firms without requiring that those firms license their patents back to Microsoft, except for any patents they have that are essential to the same industry standard standard.”
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Google in a Feb. 8, 2012 letter to IEEE: – “Google commits to continue this practice of negotiating in good faith for a reasonable period provided both parties agree that that, during that period, they shall neither (i) initiate legal proceedings against the other party’s standard essential patents nor (ii) seek injunctive relief….”
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Standards Essential Patents and RAND
RAND has Appeared in Several Contexts • Where standard essential p patents ((SEPs)) have been asserted, as an affirmative defense to enforceability • Affirmative action based on contract, fraud or antitrust • Government trade commission investigations – Government antitrust agencies may investigate because of the market power granted by inclusion as essential to a standard – Investigations in connection with patent transfers
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Standards Essential Patents and RAND
Microsoft v. Motorola ((W.D.WA)) •
Microsoft filed RAND action in the W.D.WA (2:10-cv-1823) on No 9, Nov. 9 2010 (802 (802.11 11 and H H.264) 264) – “Motorola was contractually obligated to offer a license to its identified patents consistent with the applicable patent policy [of IEEE and ITU] …. Motorola breached these contracts by refusing to offer licenses to its identified patents under reasonable rates, with reasonable terms, and on a non-discriminatory basis.” (11/09/2010 Microsoft Complaint) – Microsoft failed “to apply for a RAND license and to negotiate the terms of a RAND license and instead filing the present action, Microsoft breached the contract to which it party y beneficiary….” y ((6/15/2011 Motorola Answer)) claims to be a third p
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Judge Robart has scheduled a RAND trial for Nov. 13, 2012 – “GRANTS Microsoft’s motion insofar as it finds that (1) Motorola entered into binding g to license its declaredcontractual commitments with the IEEE and the ITU, committing essential patents on RAND terms and conditions; and (2) that Microsoft is a third-party beneficiary of Motorola’s commitments to the IEEE and the ITU.” (2/27/2012 SJ Order) – “The conundrum for the court is that before it can determine good faith offers … whether Motorola breached its dutyy to make g the court must first determine the RAND terms of an agreement between Motorola and Microsoft for Motorola’s relevant portfolio of standard essential patents.” (6/6/2012 SJ Order)
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Standards Essential Patents and RAND
Microsoft v. Motorola ((Germany) y) •
Motorola obtained injunctions on two H.264 patents in Germany – Microsoft’s Xbox 360, Windows 7, lnternet Explorer 9 and Windows Media Player found to infringe 2 Motorola patents in Germany – Microsoft ordered to cease and desist from offering in Germany the Xbox 360, Windows 7 7, IE 9 9, and Windows Media Player 12 (German Orders 5/2/2012)
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The W.D. WA Court issued a TRO/P.I. enjoining Motorola from enforcing the German injunctions – “[W]ithout [W]ithout prior leave of this court court, Motorola is enjoined from enforcing any injunctive relief it may receive in the German court system relating to patents at issue in Microsoft’s Motion.” (TRO 4/12/2012)
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The Preliminary y Injunction j is on appeal pp to the 9th Circuit – “Anti-suit injunctions are reserved for exceptional cases and may not issue every time a matter stands to overlap with a foreign court’s proceedings. The [W.D.WA] ignored this basic principle in issuing a preliminary injunction blocking orderly enforcement of a German court’s court s decision….” decision…. (5/30/2012 Motorola Appeal Brief)
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Standards Essential Patents and RAND
European p Commission Investigations g • Samsung (Jan 31, 2012) investigation – “The [E.C.] has opened a formal investigation to assess whether Samsung has abusively, and in contravention of a commitment it gave to … (ETSI), used certain of its standard essential patent rights to distort competition in the European mobile device markets in breach of EU antitrust rules.” (E.C. 1/31/2012 press release) – “Samsung sought injunctive relief … based on …certain of its patent rights which it has declared essential to implement European mobile telephony standards.” (Id.)
• Motorola ((April p 3,, 2012)) investigation g – “Following complaints by Apple and Microsoft, the Commission will investigate…, whether by seeking and enforcing injunctions against Apple's and Microsoft's flagship products such as iPhone, iPad, Windows and Xbox on the basis of patents it had declared essential …, Motorola has failed to honour its irrevocable commitments made to standard setting organizations” (E.C. 4/3/2012 press release) – “In addition, the Commission will also assess the allegation by both Apple and Microsoft that Motorola offered unfair licensing conditions for its standard-essential patents in breach of Article 102 TFEU TFEU.” (Id.) (Id )
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Standards Essential Patents and RAND
Motorola v. Apple pp (N.D.ILL) ( ) • Apple asserts Motorola is barred from asserting SEPs – “To date, however, Motorola has refused to offer Apple a license to the Asserted patents on F/RAND terms, as promised.” (1/28/2011 Apple Amended Answer)
• Motorola asserts that an injunction is warranted – “Motorola counters that Apple’s refusal to negotiate with it after rejecting its initial offer of a 2 2.25% 25% royalty warrants injunctive relief….” (J. Posner’s 6/22/2012 Order)
• J. Posner denied injunction partially based on RAND – “I don’t see how, given FRAND, I would be justified in enjoining Apple from infringing the ‘898 [patent] unless Apple refuses to pay a royalty that meets the FRAND requirement.” (Id.)
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Standards Essential Patents and RAND
Takeaways from the O Ongoing i RAND Liti Litigations ti • Evolving g cases may y determine: – What types of remedies are available for SEPs? – Which jurisdictions to bring SEP cases? – What is a RAND rate?
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Outline • Mobile Patent Wars • Standards Essential Patents and RAND • Recent Developments at the ITC • Patent Transfers • How the Mobile Wars are Affecting Other I d ti Industries
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Recent Developments at the ITC
Public Interest Factor at the ITC •
The FTC submitted a letter to the ITC regarding issuance of exclusion orders on SEPs in 337-TA-745 and 752 – “In cases that address RAND-encumbered SEPs, the FTC urges the ITC to follow the requirements of Sections 337(d)(1) and (f)(1) and consider the impact of patent hold-up on competitive conditions and United States consumers.” (6/6/2012 FTC Letter to the ITC)
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Senators and companies have also submitted letters – “We strongly support vigorous intellectual property right protection, including injunctive and exclusionary relief relief….” (6/8/2012 Letter to ITC from Congress Members) – “For the reasons discussed below, we encourage you to consider the potential harm to the public interest of issuing an exclusion order in this case.” (6/7/2012 L tt to Letter t ITC from f (different) (diff t) Congress C Members) M b ) – “I write to express Nokia’s view that where a patent is the subject of a commitment to license on … ‘FRAND’ terms, and where a manufacturer of a standards-essential product is a willing licensee of such a patent an exclusion order is against the public interest.”” ((6/6/2012 / / Nokia Letter to ITC) C)
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Recent Developments at the ITC
Public Interest Factor at the ITC •
The ITC has specifically queried Motorola and Apple regarding this in the 337-TA-745 investigation, asking the parties to address issues on review including (6/25/2012 Commission Decision to Review): – “8. Does the mere existence of a RAND obligation preclude issuance of an exclusion order?” order? – “12. Should a patent owner that has refused to offer a license on a RAND obligated patent to some entity (regardless of whether that entity is a named respondent in a Commission investigation) be precluded …?” – “13. Should a patent owner who has offered a RAND licensee that the named respondent in a Commission investigation has rejected be precluded from obtaining an exclusion order?”
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Motorola has also addressed this in the 337 337-TA-752 TA 752 Investigation – “The ITC’s statutory charter is clear: an exclusion order, absent a finding that the public interest would be disserved by such a remedy, should issue…. This must be so because in the absence of the availability of exclusion order, implementers h have littl little incentive i ti to t negotiate ti t in i good d faith f ith towards t d the th completion l ti off a license li on RAND terms.” (6/27/2012 Motorola Letter to Secretary Barton)
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Recent Developments at the ITC
Method Claims •
A recent Commission opinion in ITC No. 337-TA-724 raises an issue regarding § 337 violations based on infringement of method claims – “Apple does not directly infringe the patented method when it imports accused computers because the act of importation is not an act that practices the steps of the accused method claim”
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“The Commission held, as a matter of law, that direct infringement can violate Section 337 only if it occurs ‘at the time of importation.’” – (4/13/2012 S3 appeal brief) – “First, § 337 includes no such limitation. Second, and more importantly, the Commission's erroneously narrow interpretation of § 337 conflicts with the legislative history. Third, the Commission's new interpretation of § 337 conflicts with its own admission that violations can result from indirect infringement that occurs only l after f iimportation.” i ” (Id (Id.)) – “As the Commission correctly held, nothing in Section 337 proscribes postimportation infringing "use" of articles that do not infringe when imported, sold for importation, or sold after importation. (6/12/2012 Apple Brief)
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Recent Developments at the ITC
Method Claims • The 724 decision also has come up p in the Motorola v. Microsoft 337-TA-752 investigation – “Specifically, the Commission remands for the ALJ to (1) apply the Commission’s opinion p in Certain Electronic Devices with Image g Processing Systems, Components Thereof, and Associated Software, No. 337-TA-724, Comm’n Op. (Dec. 21, 2011)….” (6/29/2012 Commission Determination to Review)
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Outline • Mobile Patent Wars • Standards Essential Patents and RAND • Recent Developments at the ITC • Patent Transfers • How the Mobile Wars are Affecting Other I d ti Industries
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Patent Transfers
Mobile Patent Wars and Patent Transfers • Patent transfers are depicted on the outer ring area
http://visual.ly/tech-patent-wars
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Patent Transfers
Recent Patent Buying y g Spree p
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Patent Transfers
Rockstar Purchase From Nortel • Rockstar Bidco buys Nortel’s portfolio in June 2011 – Rockstar is a consortium of Apple, Microsoft, Ericsson, RIM, EMC, and Sony – Nortel, a bankrupt telecom giant, put it’s 6000+ patents up for auction – Includes patents on 4G/LTE, VOIP
• $4.5 $4 5 billion winning bid – Google’s $900M bid was a fraction of that
• Reported that value driven by desire to keep the patents from Google – “‘Each company had different reasons why they didn’t want Google to own the patents, patents ’ he said said. ‘The The value was driven by the desire to ensure [that wouldn't happen].’” – Forbes quoting RPX CEO John Amster (7/7/2011) 31
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Patent Transfers
Google g Acquires q Motorola Mobility y • Google g agrees g to buy y MMI in August 2011 – $12.5 billion dollar selling price – G Google l acquires i MMI’ MMI’s handset business along with 17,000 patents • Includes essential and non nonessential patents • Includes litigation-tested and licensed ce sed pate patents ts
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“[W]e’re determined to preserve A d id as a competitive Android titi choice h i for consumers, by stopping those who are trying to strangle it. …We’re also looking g at other ways to reduce the anticompetitive threats against Android by strengthening our own patent portfolio. Unless we act, consumers could face rising costs ….” – David Drummond, Google’s CLO on Google’s Official Blog
• Sale concludes in May 2012 after regulatory review
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Patent Transfers
Google g Buys y IBM Patents • Google g buys y over 2000 IBM p patents in three transactions – 1030 in July 2011 – 1023 in August 2011 – 217 in December 2011
• Neither party has disclosed the financial details • P Patents t t cover a range off technology t h l areas, including i l di patents related to mobile phones
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Patent Transfers
MOSAID Purchases Nokia Patents • In September of 2011, MOSAID p rchases Nokia patents purchases http://www.mosaid.com/corporate/news-events/releases-2011/110901.php
– MOSAID gets the exclusive right to license 2000 Nokia patents (many relate to industry standards for wireless technology) – Under the terms of the sale, Nokia and Microsoft receive two thirds of the proceeds htt // http://news.yahoo.com h /google-files-patent-claim-against-microsoft-nokia-215403355-/ l fil t t l i i t i ft ki 215403355 finance.html
– MOSAID bears the costs of monetization and receives one third of the proceeds
• In May of 2012 Google files complaint with the European Commission against Nokia and Microsoft
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“Nokia and Microsoft are colluding ll di tto raise i the costs of mobile devices for consumers, creating g patent trolls that sidestep promises both companies have made.” – Google made. Statement to the press on 5/31/2012 http://www.bloomberg.com/ news/201205-31/google-files-complaint-in-europeagainst i t microsoft-correct-.html i ft t ht l
http://www.bloomberg.com/ news/2012-05-31/google-files-complaint-in-europe-against microsoft-correct-.html
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Patent Transfers
Microsoft Buys y Patents from AOL • In April p 2012,, Microsoft buys y over 800 p patents from America Online – Microsoft’s winning bid is $1.1 billion – Mi Microsoft ft also l acquires i a lilicense tto h hundreds d d off other th patents t t iin the AOL portfolio
• WSJ reports that the patents are related to technologies ranging from mobile handsets to online advertising http://online.wsj.com/article/SB10001424052702303815404577333323756192742.html
• Microsoft beat out other industryy players y in the auction, including Facebook http://online.wsj.com/article/SB10001424052702303592404577361923087607762.html
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Patent Transfers
Microsoft Resells Most of the AOL Patents to Facebook • Microsoft q quickly y resold 650 of the • “Another significant step in o ourr ongoing process of patents to Facebook building an intellectual – The patents reportedly relate to areas including: email email, instant messaging messaging, Web browsing, Web search and online advertising – Facebook paid $550 million – Facebook was under pressure from a patent suit by Yahoo
property portfolio to protect Facebook's Facebook s interests over the long term.“ – Facebook’s General Counsel, (4/22/2012 )
http://online.wsj.com/article/SB100014240527023035924045773619230876 07762 html 07762.html
• Microsoft kept 200 AOL patents – The agreement grants Microsoft a license to the 650 patents it resold (Id.) 36
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Patent Transfers
What Companies are Doing in Light of the Patent Buying B ing Spree • Assessing g their existing gp portfolios • Strategically developing their portfolios g competitor/NPE p p portfolios • Monitoring • Considering defensive purchase/aggregation
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Outline • Mobile patent wars • Standards essential patents and RAND • Recent developments at the ITC • Patent transfers • How the mobile wars are affecting other i d ti industries
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How the Mobile Wars are Affecting Other Industries
Mobile Litigation is Spilling O er to Other Ind Over Industries stries •
Cases are expanding outside of smartphone litigation and into other ind stries industries – Financial institutions, restaurants, airlines, websites, etc
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An example of this is the recent spate of cases filed by Maxim that relate to mobile phone payment apps (in E.D. Tex.) – Maxim sued Starbucks, Expedia, and Capital One (Jan. 6), Bank of the West (Jan. 9), First United Bank (Jan. 11) – Comerica, Groupon, Southwest Airlines, Union Bank, and QVC (Feb. 26)
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These actions and several D.J. actions (including by Chipotle, Fidelity and PNC) were consolidated or coordinated for pretrial under MDL – “We are of the view that the Western District of Pennsylvania is an appropriate transferee district … where a declaratory judgment is pending, enjoys favorable caseload conditions and is relatively geographically accessible accessible.” (6/11/2012 MDL No No. 2354 Order)
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How the Mobile Wars are Affecting Other Industries
What is Happening in Light of Mobile War Expansion E pansion • Because of the convergence g of technology, gy, it may y be that no industry is completely unaffected by the mobile patent wars – The economy is increasingly internet and specifically mobile mobileapplication based – This exposes most businesses with mobile applications to the possibility of patent litigation in this space
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