A string of judges and regulators are expressing the frustrations with handset patent wars that are felt across the industry. Antitrust agencies on both sides of the Atlantic are raising concerns that vendors are manipulating their IPR to restrict others’ ability to compete, not just to protect their innovations ‘ and implying that resources are being diverted away from that very focus on innovation.
Judges can be more outspoken, and we have heard many comments which ring true in most right-thinking minds. Judge Richard Posner, presiding over the Motorola-Apple case in Chicago, said the US patent system was ‘chaos’ and bans on products could be ‘catastrophic’. Other choice pronouncements from this highly regarded judge include: ‘You can’t just assume that because someone has a patent, he has some deep moral right to exclude everyone else”, and more sarcastically, when faced with the prospect of Apple bringing a case back to his court again in future: ‘That’s all we need is new actions, new suits, because there’s not enough litigation worldwide between Apple and Android.’.
His counterpart in the District Court of North California, Lucy Koh, also grew impatient in the long-running Apple-Samsung saga, ordering them earlier this year to limit the scope of their complaints, Otherwise, she said: “I think that’s cruel and unusual punishment to a jury, so I’m not willing to do it.’
The statements make good soundbites, but they also reveal genuine concerns about how the IPR wars, particularly between Apple and various Android players, are restricting vendors’ freedom of movement and diverting resources to the deteriment of consumers. Many judges want to shift the action away from outright bans on products and towards negotiated or, if necessary, court-mandated royalty settlements. Posner himself said this week – without ruling on an Apple request for an injunction against certain Motorola models – that imposing compulsory royalties would be a better solution for the courts and consumers, should the Google unit be found guilty. Earlier this month, he cancelled a patent infringement jury trial between the two companies but granted Apple’s request for a hearing on an injunction.
Apple attorney Matthew Powers told the court that Apple would be satisfied with an order forcing Motorola to remove certain Apple patented technology from its phones within three months. That represented some softening of approach, since in the Steve Jobs era Apple’s main aim seemed to be to remove rival products from the shelves. However, Posner expressed concern that workarounds could lead to Motorola using inferior technology, to the detriment of consumers, and that royalties could be preferable.
Apple’s new CEO Tim Cook has indicated that he is less aggressive about pursuing injunctions, and more open to licensing deals, than his predecessor, who famously declared outright war on Android. Until recently, it appeared that Apple’s main objective was to get rivals’ products out of the stores, permanently or at least for some months while the vendors found a workaround (which might still be open to further legal challenge).
But there are few real signs of mobile OEMs pulling back from the law courts, although some cases are now coming to a head at last. This week alone, Apple was permitted to renew its bid for a ban on US sales of Samsung’s Galaxy Tab 10.1 tablet, but lost a patent ruling in The Netherlands. The US Court of Appeals for the Federal Circuit denied a petition by Samsung to reconsider a previous ruling that Apple could seek an injunction. District Judge Lucy Koh had previously refused to consider Apple’s injunction request, because the case was still before the Federal Circuit.
Meanwhile, Samsung won a case against Apple in The Netherlands, where a court in The Hague found that the iPhone maker had infringed one of the Korean company’s 3G patents.. Samsung is likely to seek multimillion euro damages, but because the patent is registered as standards essential, which brings it under Frand (fair reasonable and non-discriminatory) rules, the court said the Galaxy maker was no longer allowed to pursue any sales injunctions as long as Apple is open to licensing negotiations.
Microsoft is the other major participant in these battles, though its main objective is to increase its revenues from Android ‘ and so weaken OEMs’ perception of that platform ‘ rather than get products banned. It has signed licensing deals with many Android majors, but remains at loggerheads with Motorola Mobility, which now belongs to Google. The latter this week said it had made a new settlement offer over Xbox and smartphone patents, but Microsoft questioned whether this was serious.
Motorola Mobility has offered to pay 33 cents for every handset that uses Microsoft’s ActiveSync software, to avoid an import ban recently ordered by the US ITC (International Trade Commission), said Kirk Dailey, VP of intellectual property at the Google unit. Also, Motorola said it had lowered its own demand for royalties related to H.264 video compression patents, which it says Microsoft infringes in Windows and Xbox. It is now demanding 50 cents per unit in Windows but maintains its request for 2.25% of the cost of Xbox, a level Microsoft has denounced as ‘not remotely close to a reasonable price’. In Europe, the Windows giant has also accused its rival of breaking guidelines on Frand licensing terms for standards essential IPR. The Xbox issue comes to ahead soon in an ITC case brought by Motorola Mobility.
Some vendors may be showing greater willingness to come to the table, but many players believe the only way to avoid these situations in future ‘ and to keep royalty bills under control in LTE ‘ is to completely rethink the patent licensing structures of the mobile industry. In particular, major IPR holders like Intel have supported a patent pool system, as seen in other sectors such as PC/IP and consumer electronics. However, the major mobile asset owners have largely resisted an end to their traditional bilateral and secretive cross-licensing deals, which can be very lucrative for those in a strong IPR position.
This means there has been limited progress towards any pool system for LTE. There were once three candidates to run such a pool, but they all battled with cool response from major IPR holders like Ericsson and Qualcomm. However, one of them, VIA Licensing, is promising to open a pool within the next few months, with more than 20 members, including AT&T.
The other two would-be pools, MPEG and Sisvel, have reportedly faded, and even VIA, a seasoned operator of such schemes in many technology sectors, will have an uphill battle. Major patent owners are clinging to the traditional mobile model of bilateral, and highly secretive, licensing deals. And as many of these firms are under financial pressure, they are looking for greater returns from licensing or even offloading their IPR. Nokia, for instance, has been talking about plans to generate more cash from its huge patents mountain, and said it would not join the VIA scheme.
By contrast with bilateral horse trading, a pool would establish a common framework and royalties structure for everyone licensing a given patent. That would help to implement practices such as ‘Frand’ terms for patents which are essential to standards, and so impossible to avoid. Investigations in Europe and the US are currently looking at how major vendors may be bypassing Frand and manipulating IPR for unfair competitive advantage.
Roger Ross, president of VIA, said at an NGNM Alliance conference: ‘We have manufacturers, carriers and others from around the world participating’ in the new pool, which is now in the final stage of reviewing its flat rate licensing terms.
According to EETimes, about 3,000 LTE patents have been identified to date, about twice the number in 3G. At the same NGNM conference, Luigi Licciardi, head of technology planning at Telecom Italia, said: ‘At least 50% of the patents in an area are needed to make a patent pool succeed, and there needs to be just one patent pool in a given area.’ Waxing more lyrical, AT&T’s licensing chief Joe Alfred commented that the proposed pool was ‘the best thing that has been done in the wireless industry ever and I think it will bring about more consolidation once it gets going.’
However, Nokia’s director of technology and standards licensing, Jari Vaario, said: ‘I don’t believe patent pools are solving the stacking problem. If you have a pool for every standard in a smartphone, you wind up charging 2% of the phone’s value 100 times.’ Nokia files as many as a thousand patent applications a year, he said, and the company has made repeated statements about pursuing licensees more aggressively to boost its coffers. Vaario said too many firms are refusing to take licences at all and that is the key issue.
The Finnish firm is even prepared to sell off some of its patent portfolio, according to CFO Timo Ihamuotila. It owns over 30,000 patents and 10,000 patented innovations and scored a significant victory last year in a legal battle with Apple ‘ a win which must have enhanced the value of the IPR, and has largely kept Nokia out of the current tidal wave of litigation.
The outlook for pools looks bleak, given the political and commercial value of patents, often to the very companies ‘ like Nokia ‘ which most need new sources of revenue and power. Newer mobile powerhouses are seeking to bolster their own negotiating and litigation positions too, as seen in Google’s IPR-driven acquisition of Motorola. The firm made a smaller purchase this week, gaining beamforming patents from Magnolia Broadband, while Intel was also in the market, in a deal with InterDigital.
Intel, already a major ‘ though generally non-aggressive ‘ patent owner, is also adding to its wireless assets as it seeks greater influence on this market. It has paid $375m for about 1,700 patents and applications from licensing giant InterDigital, one of the biggest holders of IPR in the 3GPP standards.
InterDigital was trying to sell much of its portfolio last year but failed to find a buyer at the right price, but may be under increased pressure now following Huawei’s decision to file a patent-related antitrust complaint with the European Union earlier this year. Intel’s purchase covers assets ‘primarily related to 3G, LTE and 802.11 technologies’, which the smaller firm says is only a ‘small portion’ of its total portfolio.
Intel said that the deal, which is expected to close in the third quarter, ‘expands our already large, strong and diverse portfolio of intellectual property.’ InterDigital will use $200m of the proceeds to increase its share buyback program.
Google has gained smart antenna specialist Magnolia’s ‘beamforming mobile transmit diversity’ portfolio, which includes methods for increasing spectral efficiency and wireless coverage, as well as improving uplink transmission speeds at the cell edge, and device battery life. These are all critical issues in mobile broadband and may be useful in Google’s patent negotiations with rivals, as well as its own product developments, as it moves into the device sector. However, Magnolia retains the actual software, which it sells to device and chipset makers for embedding in any mobile gadget. The firm numbers Intel among its investors.
And so the arms race continues, and we fear that VIA’s voice will be a very quiet one amid all the din, even with a few giants like Intel perhaps behind it. LTE was once seen as the great hope for a new approach to wireless IPR, and the catalyst to drive lower cost handsets and a more level competitive playing field. Those dreams are certainly over now.
‘ Kodak is suing Apple again, this time over claims that some of the patents in a portfolio that Kodak needs to sell off to survive bankruptcy in fact belong to Apple. Apple, and spun-off company FlashPoint Technology, which was also named in the suit, claims ownership of the patents through a project the two companies worked on during the early 1990s. Last week, US bankruptcy judge Allan Gropper dismissed Kodak’s request to rule that Apple had ‘no interest’ in the sale of its portfolio, but instead advised the company to file a suit.