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Judge Agrees To Hear Apple vs. Motorola Patent Case

Judge Agrees To Hear Apple vs. Motorola Patent Case
June 15, 2012 3:22PM

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While the incorporation of patented technologies into standards can be beneficial, the practice also can enable patent holders to engage in "patent hold-up" practices. It has "the potential to distort competition by enabling SEP owners to negotiate high royalty rates and other favorable terms -- after a standard is adopted -- than they could not credibly demand beforehand," the FTC observed in a filing submitted to the ITC on June 6.

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A federal judge has decided to let Apple and Motorola Mobility. go at each other after all, allowing them to argue their smartphone and tablet patent claims in court after earlier deciding their claims were not worth the trouble.

Judge Richard Posner reversed his preliminary decision to cancel trial and in a final order issued Wednesday, granted Apple's request for an injunction hearing to be held this Wednesday in the U.S. District Court for Northern Illinois.

"Each party may argue that it would be entitled to injunctive relief as to its patent or patents, were the other party found to have infringed," Posner wrote.

The judge's final order also advises Apple and Motorola to be prepared to address the possibility that the court would propose "an equitable decree for a reasonable royalty going forward" as a substitute for an injunction.

"They should indicate any evidence in the existing record bearing on the question of injunctive or other equitable relief," he added.

Gauging the Consumer Impact

The hearing could produce an interesting discussion, wrote FOSS Patents blogger Florian Mueller.

"Judge Posner may already be aware of recent statements made by members of Congress, the Federal Trade Commission and a variety of industry players and associations on the question of injunctive relief over standard-essential patents," Muller wrote in a blog post Thursday.

A standard-essential patent, or SEP, is any patent which discloses and claims one or more inventions that are necessary to implement a given industry standard. Several members of the House Committee on the Judiciary have expressed concerns about the potential impact on consumers of the import bans imposed by the International Trade Commission after adjudicating consumer electronics industry disputes involving SEP. s

"Actions aimed at preventing the sale of products that rely on industry standards threaten to raise the cost and reduce the availability of popular electronics products," wrote Reps. Lamar Smith, R-Texas, John Conyers, D-Mich. and Melvin Watt, D-N.C., in a recent letter to the ITC's chairman.

"Left unchecked, the ability to leverage SEPs to obtain an exclusion order may result either in these products being excluded from markets altogether or in companies paying unreasonable royalty rates to prevent an exclusion," the three House members added.

HTC's FRAND Hurdles

One of the typical licensing rules imposed on members participating in international standards bodies is that any patent that applies to the standard under development must be adopted on fair, reasonable, and non-discriminatory (FRAND) terms. In this week's final opinion, Judge Posner advised Motorola Mobility to be "prepared to address the bearing of FRAND on the injunction analysis" should Google-owned Motorola elect to argue for injunctive relief.

While the incorporation of patented technologies into standards can be beneficial, the practice also can enable patent holders to engage in "patent hold-up" practices. It has "the potential to distort competition by enabling SEP owners to negotiate high royalty rates and other favorable terms -- after a standard is adopted -- than they could not credibly demand beforehand," the Federal Trade Commission observed in a filing submitted to the ITC June 6.

The FTC wants the ITC to consider the impact of imposing legal remedies that "could raise prices to consumers while undermining the standard setting process." Among other things, the FTC advised the ITC to deny import exclusion claims unless the holder of the SEP had previously "made a reasonable royalty offer" to the alleged patent infringer.

What's more, the FTC has proposed that the effective date of the implementation of any import bans be delayed "until the parties mediate in good faith for damages for past infringement and/or an ongoing royalty for future licensed use."

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