“It’s not clear that we really need patents in most industries . . .. You just have this proliferation of patents. “It’s a problem.”
Judge Richard Posner, Silicon Valley MercuryNews.com, July 5, 2012
Do you recall the final scene in Monty Python and the Holy Grail? After 90 minutes of farcical medieval/King Arthur-inspired humor the film concludes with a big attack scene (cliché visuals of swords, spears and knights in armor, opposing armies lined up in a field, battle music ….). King Arthur makes a Crusades-inspired speech and yells charge. Just as the armies are about to engage a police car pulls up with siren blaring. 20th century British bobbies jump out and arrest some of the knights, who put up no resistance. Others are simply told to go home. The war is cancelled. (video).
This is not very different from what just happened in the patent war between Apple and Motorola Mobility (owned by Google) over smartphone patents. In that case, initially filed in federal court in Wisconsin in late 2010, a year before Steve Jobs’ death, each side accused the other of multiple patent infringements. To put things in context, this case was part of the war against Google’s Android OS that Jobs initiated before his death. According to the Isaacson biography of Steve Jobs, Jobs stated that Android’s use of Apple’s ideas equated to “grand theft,” and that Jobs was “willing to go thermonuclear war on this.” He is also reported as saying that ”I will spend every penny of Apple’s $40 billion in the bank to right this wrong.” (both quotes referenced here).
When it was first filed in 2010, the case was assigned to a Wisconsin federal trial judge. In mid-2011, Google purchased Motorola Mobility (owner of the patents) for $12.5 billion, to strengthen its patent position with Android. In October 2011 Jobs passed away. Then, in December 2011, the case was hit by an earthquake: the case was re-assigned to Judge Richard Posner, an appellate judge on the 7th Circuit and possibly the most highly respected federal appellate judge in the country. According to reports Posner requested that the case be assigned to him. Hmmm, why did he do that? And why this case?
After Judge Posner signed on, the case picked-up steam. While the case had only 300 docket entries when Judge Posner took over, after that it was a rare day when there were no filings in this case. By late June 2012, six months after Judge Posner entered the case, the docket showed 1043 entries.
A quick look at the docket shows all the usual suspects: multiple lawyers and law firms on both sides, multiple experts, and endless motions on the merits and discovery issues. I don’t know what the parties have spent on this case, but surely it was many millions of dollars. When Judge Posner took over the case in late 2011 he fast-tracked it, scheduling the case for trial in June 2012. Some judges manage their caseloads passively, allowing them to drag on, sometimes with the tacit cooperation of the litigants and their lawyers, who are in no hurry to get to trial. Not this case. Judge Posner seized the case by the horns and all four hooves.
You can only begin to imagine the resources invested in this case as it moved toward a summer 2012 trial. Anyone who has not been through an exercise like this may have trouble imagining the workload and pressure. Like a war, the battle takes place on many fronts with different generals. Motions are filed and opposed. Experts (damages and liability) and fact witnesses are prepared for the terrors of the witness stand. Opening statements and cross-examinations are prepared. Legal issues are researched and trial briefs prepared on every imaginable issue, just in case. The clients have to be kept in the loop, glad-handed and convinced their lawyers know what they’re doing. Because other cases with overlapping issues are pending in U.S. courts, the ITC and outside the U.S., lawyers in those cases need to be kept in the loop. Hotel rooms are rented (entire floors), war rooms established and communications and litigation support fine-tuned. Vacations and weddings are postponed. Careers hang in the balance.
Sounds a bit like that final scene in the Holy Grail, doesn’t it? After a long journey the armies are prepared for battle. They’ve sharpened their weapons, donned their armor and their leaders have given them locker-room pep talks. Everyone is waiting for the final command – charge!
But wait! Just like the final scene in the Grail, starting in late May you could hear the sirens wailing in the distance. In a decision issued May 22, 2012, Judge Posner knocked both sides’ damages experts out of the case like so many ten pins. For example:
- Apple’s expert opined that a reasonable royalty for Apple’s 6.493.002 patent (on screen status control) would be $14 million. However, the consumer survey on which the expert based this conclusion was defective. Excluded, ruled Judge Posner. A Motorola damages expert improperly based his $1 million defensive damages opinion for infringement of this patent on what a Motorola engineer told him it would cost to create a “work around” to the patent. Excluded, held Judge Posner. Any expert confronted with this question should acquire information from a disinterested engineer, not his own client.
- Apple’s expert’s opinion of $35 million in reasonable royalty damages for infringement of Apple’s 7,479,949 patent (relating to the heuristics used to manipulate the screen using finger contact) was excluded because the expert failed to consider less expensive alternatives. Motorola’s defensive expert’s reasonable royalty opinion of $100,000 on this patent was disallowed for similar reasons. Sloppy field research by the expert.
Whatever damages opinions of the various experts had not been excluded by May 22nd were rendered irrelevant based on summary judgment rulings on the substantive patent claims themselves. Simply put, the case was a shambles. However, the trial was still scheduled to commence in early June. Weddings remained postponed, lead shielding continued to be applied to the war room walls, 20 hour days (work days, that is), remained ongoing. However, as the parties spent the last week of May and the first week of June preparing for a trial scheduled to begin on Monday, June 11th (with no small level of consternation, no doubt) Judge Posner dropped his second bomb, issuing an order on June 7th canceling the trial altogether. As he stated in that Order, “I have tentatively decided that the case should be dismissed with prejudice because neither party can establish a right to relief. The trial scheduled to begin this coming Monday is therefore canceled.”
Wow. Trial cancelled, with no more fuss or muss than the bobbies interrupting the battle at the end of the “Holy Grail.” Pack up your stuff and go home, said Judge Posner to these modern warriors. The war is, well … the war is just cancelled. I sometimes refer to this as the “judicial reality check.” Lawyers and parties spend months or years creating their perception of a case. A judge then takes on look at it and says, “no.” However, this is an extreme case of judicial reality check.
Now, if if you are familiar with Apple and Google you may be thinking, ”what’s wrong with this picture”? First, aren’t the damages number awfully small? With one exception Apple’s damages claims were in the low double-digit millions. Even the exception was only several hundred million dollars. Maybe that’s a lot of money to the average working Joe, but it’s not even a rounding error for Apple and Google (recall that Google paid over $12 bilion for the Moto patent portfolio last year). Remember Oracle’s $2 billion copyright infringement case against SAP, tried in 2011? That was about money. This case? Meh.
If you’re savvy you may be thinking, maybe it wasn’t the money in the first place – maybe what was really at stake here was the injunction the winning party hoped to obtain. If Apple could lay down some speed bumps for Android, it would slow down Android-based phone competition with the iPhone. In early 2011, recall, the iPhone was dead in the water growth-wise (OK, dog paddling), while Android-based phones were gobbling up market share (7 points in Q1 2011, when Apple and Google were revving their engines in this lawsuit).
So, perhaps money damages were a distant second thought in everyone’s minds as they prepared for this case. Get before a jury, get a finding of liability and some damages (perhaps this is an explanation for the puzzling question of how so many high priced experts — and the high-priced lawyers who guide them — could fail so totally to put together a damages case that could withstand Judge Posner’s pen), and then, BANG!, go for the jugular with an injunction that would put Android (or Apple) out of business. Or at least under the weather for a few months.
Well, if you think this may have been the true motivation behind this suit you are probably correct, but the litigants in this case didn’t reckon with Judge Posner and his campaign to singlehandedly change the course of U.S. patent law. In his June 7th Order (cancelling the trial), he took care of either party’s hope for an injunction as well, stating that “because injunctive relief would impose costs disproportionate to the harm to the patentee and the benefit of the alleged infringement to the alleged infringer and would be contrary to the public interest, I cannot find a basis for an award of injunctive relief.” In other words, no damages and no injunction. Setting aside the fact that this is only one of many litigations in the smartphone wars, this was a dark day for Apple, which had the most to gain from a win in Judge Posner’s courtroom.
However, the judge was not quite done. First, on June 22nd he issued a patented 38 page “Posner opinion” rejecting the parties’ last-minute attempts to revive their damages claims and concluding that a federal court is not obligated to try a case when the best the plaintiff can expect to recover is nominal damages (that is, $1). With respect to injunctive relief Judge Posner noted that the fact that some of the patents at issue are industry standard (subject to a “fair, reasonable and non-discriminatory,” or “FRAND” license).*
*The FRAND implications of this decision, while not discussed here, are significant.
Further addressing the issue of an injunction, Judge Posner’s described reasoning that may leave a non-lawyer shaking his head in bewilderment: “neither 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—but that is not because damages are impossible to calculate with reasonable certainty and are therefore an inadequate remedy; it’s because the parties have failed to present enough evidence to create a triable issue.” Classic Posner – you could have proven damages, and you have no one to blame but yourself for failing to do so. However, the fact that you could have (even though you didn’t) precludes injunctive relief. In fact, just because a patent holder can obtain damages for past infringement does not preclude an injunction prohibiting future infringement. I expect this to be a focus of an appeal (an appeal appears almost certain). This ruling was further complicated by Judge Posner’s suggestion that a future royalty, not an injunction, might be the best way to handle the issue. However, the idea of a post-judgment royalty, or a “compulsory license” as its often termed, is itself controversial in patent law. Another issue for appeal, quite likely.
Apple should also be denied an injunction (according to Judge Posner), given the ease Google/Moto would have doing a “design around/invent around” of the Apple patents. Again, this appears speculative and likely to be attacked on appeal. And, Judge Posner noted the negative impact an injunction would have in the smart phone market on his decision to deny an injunction.
To make too-long a story a bit shorter, on June 22nd Judge Posner dismissed the case in its entirety. No trial, no damages, no injunctions. Like the knights in the Holy Grail, the combatants were told to go home. No jury was empaneled, no witnesses testified, no verdict was rendered. The case ended, not with a bang, but with barely a whimper. And Apple truly did whimper, asking Judge Posner, after final judgment, to sever two patents from his final judgment, pending the Federal Circuit’s ruling on their validity in a different case. His humorous response (ok, humorous to a lawyer familiar with the minefield of civil procedure) appears here, courtesy of Groklaw.
Is this case over? Technically, no. The parties will appeal to the Federal Circuit (where all patent appeals are filed), and that court may or may not agree with Judge Posner. It may feel that Judge Posner had no business trying to influence an important patent case by putting his own imprint on the law. I find some of his rulings questionable. But, a judge on a crusade to reform the patent system can get sloppy towards the end. However, any decision is likely to arrive a year from now, and any retrial long after that. By then the sands will have shifted. The technologies in this case, and their importance in the smartphone wars, are likely to have been superseded by other battles. And, worst of all, the parties may have to face Judge Posner. Again.