Apple and Microsoft v. Google: patent war shifts to antitrust

April 4, 2012

In a really smart piece last month, my Reuters pal Dan Levine wrote that Steve Jobs’ promise to kill Google’s Android operating system has not been fulfilled. Instead, wrote Levine and co-author Poornima Gupta, Apple’s patent war against Android users Motorola, Samsung, and HTC had become “a costly global war of attrition.” Both sides have won skirmishes, but no battle has been decisive. The Reuters story quoted Judge Richard Posner of the 7th Circuit Court of Appeals, who is overseeing a Motorola case in U.S. District Court in Chicago. “You’re not going to shut down the smartphone,” Posner told Apple’s lawyer. “[And] they’re not going to shut down the iPhone.”

The exact same thing could be said of Microsoft’s patent war with Google and its Android acolytes. When the smartphone patent infringement cases launched in 2009 and 2010, maybe it was feasible that one or two of the big three could kill off another of them. But since then, with Apple and Microsoft teaming up to buy Nortel patents and Google countering with its purchase of Motorola Mobility, this war has become a standoff that can only be resolved with cross-licensing deals.

That’s why antitrust arguments — as opposed to patent infringement claims — have been creeping into the spotlight over the last few months. On Tuesday, the European Union announced that it has opened antitrust investigations of Motorola’s demands for licensing fees on standard-setting patents, following complaints by both Microsoft and Apple. (Google’s Android partners, of course, have lobbed similar allegations of patent extortion at Microsoft.) The goal of such claims is to drive down the cost of licensing one another’s patents. In other words, if you can’t beat ’em, pay as little as possible to join ’em.

We should have a much better idea of the strength of Microsoft’s assertions against Motorola by next week, when Microsoft’s lawyers at Sidley Austin will get to air their arguments about Motorola’s alleged abuse of its industry-standard patents at a preliminary injunction hearing before U.S. District Judge James Robart in federal court in Seattle. Microsoft moved for the injunction on March 28, asking the judge to stop Motorola from taking any action to block certain Microsoft products from the German market. Microsoft said it had brought the Seattle suit in 2010 “to force Motorola to honor its commitment to license its standard-essential patents.” Instead, according to Microsoft, Motorola went to German courts, seeking its own injunction against Microsoft. Microsoft argued in its Seattle motion that it needs a restraining order to preserve the U.S. judge’s ability to decide the merits of its case.

It outlined those purported merits in a summary judgment motion filed last Friday. According to Microsoft, Motorola made a “blatantly unreasonable” demand that it pay $4 billion (yes, billion) in annual royalties for the use of 50 Motorola patents in Microsoft Windows. The demand “was so overreaching that no rational company could ever have accepted it or even viewed it as a legitimate offer,” Microsoft asserted. “Motorola’s obvious strategy was … to make an offer that Microsoft was sure to refuse so that Motorola then would be free (in its view) to sue on its standard-essential patents to gain leverage in other disputes with Microsoft.” Microsoft asked for a ruling that Motorola had breached its agreement to license standard-setting patents on fair and reasonable terms.

Motorola is represented in the Seattle case by Ropes & Gray. Ropes partners Jesse Jenner and Steven Pepe didn’t return my calls. I also left messages with Microsoft inside counsel Andrew Culbert and outside counsel David Pritikin of Sidley but didn’t hear back.

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